Vietnam monetary policy to persist with interest rate reduction

By Dinh Vu, Huong Dung
Mon, June 26, 2023 | 2:55 pm GMT+7

The State Bank of Vietnam (SBV) will continue with its interest rate reduction policy despite the possibility of other rate hikes by the U.S. Federal Reserve.

A senior central bank official explained that the SBV has room to persist with the policy with the aim of supporting economic recovery.

Since the beginning of this year, the SBV has deployed interest rate cuts four times. As a result, deposit interest rates in the market have dropped sharply.

State-owned commercial banks have led the way with average cuts of 0.5-1 percentage points in the past month. Their interest rate on 1-2 month term deposits is currently the lowest in the system at 3.4% per year. The rate is from 5% and only 6.3% per year for six-month and 12-18 month deposits, respectively.

Private commercial banks have also announced several cuts in the last few weeks with an average reduction of 0.1-0.3 percentage points per year each time, depending on deposit terms. The deposit interest rate of 8% per year is no longer seen at banks.

Vietnam’s central bank says it has more room to reduce policy interest rates from now to the year-end. Photo by The Investor/Trong Hieu.

Vietnam’s central bank says it has more room to reduce policy interest rates from now to the year-end. Photo by The Investor/Trong Hieu.

The highest rate at some large private banks like ACB, VIB, TPBank, Sacombank, and VPBank is currently around 7% a year (for deposits of under VND1 billion or $42,500).

At a June 21 press conference on the banking sector’s six-month performance, SBV Deputy Governor Dao Minh Tu said that the average deposit interest rate of commercial banks had gone down 0.7 percentage points compared to the end of 2022 to about 5.8% per year. The average lending interest rate in VND then stood at 8.9% per year, down 1 percentage point from late 2022.

Although interest rates have fallen sharply, credit growth has been very low. As of June 15, the country’s credit growth was just 3.36% over the end of last year.

"The main reasons for this included weak credit demand and a decline in corporate financial capacities while commercial banks haven’t lowered their lending criteria," he said.

The central bank deputy governor stressed that commercial banks had sufficient credit supply but demand was weak in line with the slowing economy. Then there are enterprises that need bank loans but fail to meet lending criteria.

The SBV expects credit growth to reach 14-15% this year, which means much higher growth in the second half of the year. Credit provided in the first half was around VND12,320 trillion ($524 billion), up 8.94% year-on-year.

Tu said the central bank planned to meet with commercial banks and persuade them to reduce costs and lending interest rates to support businesses and the economy.

On worries about possible rate hikes by the Fed, Tu said: “Even if the Fed increases interest rates, we can continue reducing them because we have controlled inflation and economic macroeconomic indicators allow us to do that.”

Therefore, reducing interest rates would be the focus of the SBV’s policy in the coming time, he said.

Economist Le Xuan Nghia said that in the current world and domestic contexts, the exchange rate pressure on monetary policy was not great.

The Fed’s pause in interest rate hikes and the weakening USD provide room for the SBV to continue reducing its policy interest rates, leading to falling lending rates in the market, he said.

While interbank interest rates were still high, it becomes very necessary for the central bank to cut interest rates, he said. He felt that lending rates should be reduced to 7-8% per year for 12-month loans from now to the end of the year.

“This is an important solution for businesses to recover and the economy to regain its growth momentum soon,” he stressed.

Comments (0)
  • Read More
Vietnam plans to spend over $2 bln on US agri imports

Vietnam plans to spend over $2 bln on US agri imports

Vietnam’s Ministry of Agriculture and Environment is expected to sign MoUs to purchase over $2 billion worth of U.S. agricultural, forestry, and fishery products.

Economy - Tue, June 3, 2025 | 10:01 pm GMT+7

New flight route to help Danang attract more wealthy tourists from Middle East

New flight route to help Danang attract more wealthy tourists from Middle East

The new Dubai-Danang flight route has been launched, paving the way for an influx of high-spending travelers from the Middle East and Europe to the central Vietnam city, one of the country's top tourist attractions.

Companies - Tue, June 3, 2025 | 9:13 pm GMT+7

Food giant C.P. Vietnam’s 'diseased' pigs improperly quarantine-stamped: authorities

Food giant C.P. Vietnam’s 'diseased' pigs improperly quarantine-stamped: authorities

The widely circulated images of diseased pigs from C.P. Vietnam, a subsidiary of Thailand’s food giant Charoen Pokphand Foods Public Company Limited (CPF), date back to 2022, but the pigs were improperly stamped, Vietnamese authorities stated on Tuesday.

Companies - Tue, June 3, 2025 | 5:36 pm GMT+7

Son Hai Group proposes expanding 263km stretch of Vietnam's North-South Expressway

Son Hai Group proposes expanding 263km stretch of Vietnam's North-South Expressway

Vietnam’s Son Hai Group is seeking Prime Minister Pham Minh Chinh's approval to invest in the expansion of a 263-kilometer stretch of the eastern section of the North-South Expressway.

Infrastructure - Tue, June 3, 2025 | 3:53 pm GMT+7

FedEx establishes direct serve in Vietnam on surging demand

FedEx establishes direct serve in Vietnam on surging demand

FedEx Express Corporation, one of the world’s largest express transportation companies, has transitioned to a direct-serve presence in Vietnam amid the Southeast Asian country’s growing international shipping demand.

Industries - Tue, June 3, 2025 | 2:55 pm GMT+7

Vietnam’s steel giant Hoa Phat to deliver thousands of containers to domestic shipping lines  

Vietnam’s steel giant Hoa Phat to deliver thousands of containers to domestic shipping lines  

Vietnam’s largest steelmaker, Hoa Phat Group, will supply thousands of containers to VIMC Container Transport JSC (VIMC Lines) and Vinafco Shipping JSC under recently signed contracts.

Companies - Tue, June 3, 2025 | 12:16 pm GMT+7

Shinhan Bank receives 'Fastest growing SME bank Vietnam 2025' award

Shinhan Bank receives 'Fastest growing SME bank Vietnam 2025' award

South Korea’s Shinhan Bank Vietnam Limited has been named the “Fastest Growing SME Bank Vietnam 2025” by World Economic Magazine (UK).

Companies - Tue, June 3, 2025 | 10:19 am GMT+7

Vietnam’s ‘shrimp king' Minh Phu expects to return to profit in 2025

Vietnam’s ‘shrimp king' Minh Phu expects to return to profit in 2025

Minh Phu Seafood Corporation (UPCoM: MPC), Vietnam’s leading shrimp exporter, expects net profit to reach VND997 billion ($38.03 million) this year, reversing the loss in 2024.

Companies - Tue, June 3, 2025 | 8:38 am GMT+7

CMC Corporation breaks ground on $300 mln technology hub in Hanoi

CMC Corporation breaks ground on $300 mln technology hub in Hanoi

Vietnam's leading technology firm CMC Corporation on Monday broke ground on its $300 million Hanoi CMC Creative Space (CCS Hanoi) project.

Industries - Mon, June 2, 2025 | 11:19 pm GMT+7

Thailand’s industrial output up after 9-month decline

Thailand’s industrial output up after 9-month decline

Thailand’s industrial output has turned positive for the first time in nine months, with the automotive sector rebounding after a 21-month slump, said Thai Deputy Finance Minister Paopoom Rojanasakul.

Southeast Asia - Mon, June 2, 2025 | 10:48 pm GMT+7

Singapore, France to expand cooperation in civil nuclear energy, defence technology, AI research

Singapore, France to expand cooperation in civil nuclear energy, defence technology, AI research

Singapore and France have upgraded their Strategic Partnership signed in 2012 to a Comprehensive Strategic Partnership (CSP), marking Singapore's first CSP with a European country.

Southeast Asia - Mon, June 2, 2025 | 10:47 pm GMT+7

Masan MEATLife stock jumps on continued profit momentum

Masan MEATLife stock jumps on continued profit momentum

The ticker of Masan MEATLife (MML), a subsidiary of Vietnamese consumer retail giant Masan Group, jumped by 8.71% to VND31,200 ($1.2) per share on Monday, after it reported profit for the third consecutive quarter in Q1/2025.

Companies - Mon, June 2, 2025 | 10:34 pm GMT+7

Vietnam's VSIP Binh Dinh industrial park seeks to become 'golden destination' for Thai firms

Vietnam's VSIP Binh Dinh industrial park seeks to become 'golden destination' for Thai firms

The Becamex VSIP Binh Dinh service-urban-industrial complex in the central province of Binh Dinh is emerging as a promising destination for Thai enterprises, said its developer Becamex Binh Dinh JSC.

Industrial real estate - Mon, June 2, 2025 | 10:24 pm GMT+7

Termination of feed-in-tariff mechanism a major bottleneck in Vietnam’s electricity transition: expert

Termination of feed-in-tariff mechanism a major bottleneck in Vietnam’s electricity transition: expert

A major bottleneck in Vietnam’s electricity transition has been the termination of the feed-in-tariff (FIT) mechanism in 2021, with no suitable replacement mechanism in place, according to the director of Hanoi-based Institute of Energy Technology.

Economy - Mon, June 2, 2025 | 4:56 pm GMT+7

Vietnam Vaccine JSC launches high-quality healthcare shop chain

Vietnam Vaccine JSC launches high-quality healthcare shop chain

Vietnam Vaccine JSC (VNVC), well known for its vacciation services, on Saturday launched its VNVC Shop, a chain offering safe, high-quality healthcare products from globally recognized brands.

Companies - Mon, June 2, 2025 | 4:05 pm GMT+7

Vietnam heavyweight PV Gas plans $3 bln investment over next 5 years

Vietnam heavyweight PV Gas plans $3 bln investment over next 5 years

PV Gas, a subsidiary of state-owned giant Petrovietnam, plans to make "strong investment" over the next five years in areas such as infrastructure and import-distribution of LNG.

Energy - Mon, June 2, 2025 | 2:01 pm GMT+7