Banking & Finance

With fewer concerns about currency and external stability, Vietnam’s central bank is likely to be more comfortable with delivering interest rate cuts to support growth.

Fitch expected the central bank to further cut the benchmark rates, which would take the refinancing rate to 4.0% and the discount rate to 2.5%.

Lower policy rates would enable commercial banks to cut interest rates in a more sustainable way, which in turn contribute significantly to economic recovery, said a central bank official.

The cut is applied to the refinancing interest rate, discount interest rate, and overnight lending rate.

One quarter of banks in Vietnam will actively pursue modern digital core platforms by 2025.

The finance ministry is seeking preferential loans from international organizations to relieve pressure of growing borrowings from domestic sources.

Vietnam would be among a handful of nations maintaining positive economic growth this year, according to a World Bank expert.

Vietnam is currently a front-runner in the Covid-19 fight, said Nicolas Audier, chairman of the European Chamber of Commerce in Vietnam (EuroCham).

Fitch could revise the outlook on Vietnam’s banking sector and ratings back to stable from negative.

The central bank had previously cut the benchmark interest rates by 0.5 – 1 percentage point in March.

As Vietnam has progressively contained the Covid-19 pandemic, the priority now should be to boost business and production activities, said Prime Minister Nguyen Xuan Phuc.

As of April 15, budget revenue collection reached VND427.2 trillion (US$18.35 billion), equivalent to 28.2% of the year's estimate.

Any currency weakness is likely to be mild so as to avoid possible sanctions from the US given Vietnam's inclusion in the US Treasury’s currency manipulator watch list.

The consumer prices, however, increased 4.9% year-on-year in the January- April period, the highest four-month growth rate during the 2016 – 2020 period.

Multinational companies have more favorable conditions in exercising tax avoidance, and to a larger extend, tax evasion, compared to their peers in the state and private sectors.

In this year's state budget plan, revenue from crude oil is predicted at VND35.2 trillion (US$1.5 billion), accounting for 2.3% of the total.

In the East Asia and Pacific region, Vietnam ranked third after China and the Philippines.

On top of weak economic activity and low credit demand, the Covid-19 crisis macroprudential measures announced by the central bank will weigh heavily on banking sector profits for 2020.

As Vietnam is among a handful of countries that are effectively containing the pandemic, it has a golden chance to step out of the economic deceleration much sooner than other economies.

The government is determined to maintain fast economic growth and stabilize market prices at the same time, said Prime Minister Nguyen Xuan Phuc.