The State Bank of Vietnam, the country's central bank, followed a pro-active and flexible monetary policy in the first six months, cutting interest rates and working in close conjunction with fiscal and other policies.
Interest rates on loans decreased by 0.5 percentage points in the first half of 2018.
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Nguyen Quoc Hung, director of the State Bank of Vietnam (SBV)'s Credit Department, said that credit growth the first half this year reached 6.9%, with focus on the government's priority sectors such as agriculture, exports, supporting industries, small and medium-sized enterprises, and high-tech firms.
The central bank also instructed credit institutions to restrict lending to risky sectors such as real estate, securities and consumption, he said.
Nguyen Bich Lam, director of the General Statistics Office (GSO), said that the monetary policy has significantly helped the country's GDP expand 7.08% in the first half of the year, the highest first-half growth rate since 2011.
The SBV purchased around US$11 billion worth of foreign currency in the first six months this year, bringing the forex reserve fund to US$63.5 billion now.
Following a rise of 48% last year, the benchmark VN Index of the Ho Chi Minh City Stock Exchange jumped more than 20% from the beginning of the year to early April before entering a correction phase mainly due to global uncertainties.
Hard targets ahead
At the beginning of 2018, the central bank set the objective of implementing an active, flexible and prudent monetary policy in close coordination with fiscal policies. Other macroeconomic policies aim to control inflation in accordance with the target, stabilize the macro economy, and contribute to support economic growth at a reasonable level. This ensures the liquidity of the credit institution, stabilizing the money and foreign exchange markets.
With the achievements gained in H1 2018 and recent years, experts suggested the central bank continue to apply the current stable and flexible monetary management policy as it is suitable and effective.
According to Nguyen Xuan Thanh, director of the Fulbright Economics Teaching Program in Ho Chi Minh City, the monetary management policy is operating so well that the central bank should not loosen it.
The SBV had to do so a year ago to support economic growth, which reached only over 5% in the first quarter of 2017, Thanh said, adding that the country's GDP growth last year was supported significantly by the monetary policy.
However, the policy should not be loosened this year as the GDP rate was good in the beginning of the year, with positive signals in domestic demands and exports as well as in manufacturing and processing, Thanh added.
Nguyen Thanh Ha, director of the SBV's Monetary Policy Department, said the central bank will continue to manage the monetary policy actively and flexibly in the remaining months of the year in order to better control inflation and support economic growth.
He, however, noted that there should be close co-operation between monetary and fiscal policies and the State's price management mechanism in order to make the policies effective, as inflation is under pressure owing to volatility of global commodity prices, price hikes of goods managed by the goverment, and high growth of local consumption demand and securities markets.
To handle and neutralize these pressures and risks, it's necessary to follow and closely monitor inflation to promote coherent coordination between fiscal and monetary policies, and price control to keep inflation at 4%, thus creating a solid foundation for maintaining macroeconomic stability, he said.
Moreover, he added, the rising inflows of foreign direct investment, foreign indirect investment capital and divestment of State-owned enterprises will hit the central bank hard this year, and provide a challenge to balance cash flows to moderate the pressures on inflation, interest rates, and the exchange rate.
In order to achieve the growth target for the whole year, GSO's Lam also suggested the monetary policy should be implemented in a cautious and flexible manner in tandem with the fiscal policy and other measures in order to stabilize the macro-economy, curb inflation and support growth.
