Sep 17, 2019 / 11:01

Lower benchmark rates help boost Vietnam’s economic growth:

The Hanoitimes - The State Bank of Vietnam, the country’s central bank, would continue to closely monitoring the macro-economic conditions and managing the monetary policy in a flexible manner, aiming to support economic growth.

The State Bank of Vietnam (SBV)’s decision to lower the benchmark interest rates by 0.25 percentage points would help credit institutions access capital from the SBV at more affordable costs, in turn boosting their liquidity and the country’s economic growth, according to Pham Thanh Ha, head of the SBV’s Monetary Policy Department. 
Pham Thanh Ha, head of SBV’s Monetary Policy Department. Source: SBV.
Pham Thanh Ha, head of the SBV’s Monetary Policy Department. Source: SBV.
On September 12, the SBV issued Decision No.1879 regulating a 25 basis-point cut to refinancing interest rate, rediscount interest rate, interest rate applicable to overnight loans, and interest via open market operation (OMO), effective since September 16. 

Following the decision, the refinancing interest rate is down from 6.25% per annum to 6%, rediscount rate from 4.25% to 4%, overnight interest rate from 7.25% to 7% and interest rate via OMO from 4.75% to 4.5%. 

According to Ha, in the past, where central banks in the world raised their respective interest rates, the SBV had consistently managed the monetary policy towards stabilizing interest rates in the market, which were part of the efforts for stable macro-economic conditions and supporting economic growth. 

However, as the global economic environment has become less favorable, a number of major central banks, including the Federal Reserves (FED) and the Central European Bank (CEB), decided to cut the benchmark rates. 

In the context that Vietnam’s macro-economy remains stable, with GDP growth in the first six months of this year coming at 6.76%, inflation rate 2.57% in the January – August period, the monetary and foreign exchange market under control, the SBV cut the benchmark rates to support economic growth and boost liquidity in credit institutions, Ha explained. 

With strong macro-economic foundation and credit growth progressing as planned with target of 14% in 2019, the interest rate is predicted to stay stable, stated Ha. 

Moreover, as easing monetary policies have been adopted by world central banks, pressure against USD/VND exchange rate has been partly eased, he added. 

Ha said the SBV would continue closely monitoring the macro-economic conditions and managing the monetary policy in a flexible manner, aiming to support economic growth. 

After the SBV’s decision, the stock market has responded positively, particularly with a hike in value from banks’ stocks, while the real estate market has opportunities to sell more. 

Meanwhile, the corporate bond market has been given space to recover, offsetting impacts on the mid- and long-term capital for enterprises. 

Banking expert Nguyen Tri Hieu told VnEconomy the Vietnamese economy is under multiple impacts from the US – China trade war, the country’s two major trading partners, so the interest rate could not remain unchanged. 

The recently adjusted-benchmark rate is quite low compared to the current loan rates, which poses no major impact to the deposit and lending rates, Hieu added, saying the SBV stays cautious in managing interest rates. 

Le Xuan Nghia, former vice chairman of National Financial Supervisory Committee, said the SBV may consider another rate cut from now on until the end of the year to have a substantial impact and support economic growth. 

Bao Viet Securities Company (BVSC) said the SBV’s move is deemed to have orientational and psychological effects, instead of major impacts on the financial market.