Vietnam central bank to keep ‘open’ policy to support economic growth: official

The Vietnamese central bank will conduct an “open” monetary policy in a way that supports the local economy with more capital, said its Deputy Governor Dao Minh Tu, as there is large room for further cash injections toward the year-end.

“The State Bank of Vietnam (SBV) will continue to provide funds and secure liquidity for local banks,” Tu told a press meeting on Thursday.

“In case macroeconomic conditions are conducive to economic growth, with inflation and the USD/VND exchange rate under control, we will leave doors open to interest rate management in the coming time,” he added, without specifying a clear direction.

After the U.S. Federal Reserve (Fed) cut its benchmark interest rates last month after more than four years, the SBV stepped up cash injections after lowering its interest rate on open market operations (OMO) to 4% per annum from 4.25%.

In the coming months, the SBV will continue to manage interest rates in line with market movements, macroeconomic conditions, inflation, and monetary policy goals, Tu said.

The banking regulator will manage the forex rate in a flexible manner, in alignment with other monetary tools to keep the forex market stable and contribute to inflation control and macro stability, he stated.

Tu informed that credit growth had reached 9% in the first three quarters of this year, leaving a spare space of six-percentage point expansion in the last three months, given a target of 15% lending growth for the whole of 2024.

The SBV will strive to funnel lending into prioritized fields and growth drivers determined by the government, limiting loans to high-risk areas.

“Lending activities will focus on key projects, BOT (build-operate-transfer) projects, and credit packages for select sectors,” Tu added.

He went on to say that the SBV will aggressively direct banks to implement the VND120-trillion ($4.76 billion) low-cost loan package for affordable and social housing development, the VND30-trillion lending program for the forestry and fishery industries, and other aid programs for clients that were hit by typhoon Yagi.

In its latest macro update on Vietnam, HSBC projected Vietnam to grow 7% in 2024 and 6.5% in 2025, the highest rates among ASEAN-6.

With this projection and lingering inflation, HSBC does not expect the SBV to cut interest rates until the end of next year. “We think 4.5% is roughly the [policy] rate we're comfortable with here in Vietnam,” said HSBC chief Asia economist Frederic Neumann in Hanoi earlier this week.

Ngo Dang Khoa, head of markets and securities services at HSBC Vietnam, told The Investor that he expected the SBV to keep an "accommodative" monetary policy to support economic growth.

Meanwhile, researchers with Singapore-based UOB last week said the risks of the SBV shifting towards easing its policy have certainly been more considerable than before, given inflation showing signs of easing, USD strength expected to wane further on the back of the U.S. Fed easing policy, and with adverse effects spreading in the aftermath of typhoon Yagi.

They anticipated the SBV to maintain its refinancing rate at the current 4.5% while focusing on facilitating loan growth and other support measures.