Illustrative image (Photo: Vietnamplus) Hanoi (VNS/VNA) - A reportby securities firm SSI on the financial and monetary market says depositinterest rates are likely to be cut by 0.5- 1 percentage point this year, andlending interest rates would also be cut by at least 0.5 percentage points asrequired by the Government.
Low inflation, steadyforeign exchange rates and tools available to the State Bank of Vietnam (SBV) to monitor money flowsare among the factors that will enable credit institutions to cut the interestrates.
Hoang Minh Hoan, deputy director of the Sai Gon Commercial Joint Stock Bank,said the current exchange rate stability, record high foreign exchangereserves, solid economic growth, and faster credit growth than deposit growthare likely to drive the cuts.
The liquidity availablein the banking sector and lower refinancing and discount rates are alsofactors, according to Hoan.
Generally speaking,most current macroeconomic factors support the stability of interest rates,which allows lenders to reduce them after the Lunar New Year.
Ngo Dang Khoa, country head of globalmarkets at HSBC Vietnam, agreed with Hoan, saying that the Vietnamese dong remains one of the most stable currencies in theregion despite the global political instability and economic events at home.
He said its valueagainst the US dollar remained virtually unchanged through 2019, sometimes evenappreciating as the central bank actively intervened.
This and the FDIflowing into Vietnamenabled it to buy huge amounts of dollars, thus increasing the country’sforeign exchange reserves to a record 73 billion USD on October 30.
Through the course ofthe year it bought 16 billion USD.
Besides, the tradesurplus in the first 11 months of the year was a record 9.1 billion USD.
The World Bankestimated overseas remittances to Vietnam in 2019 to reach 16.7 billion USD, up 4.6 percent from theprevious year.
Credit growth for theyear was only 12.1 percent while deposit growth was 12.5 percent.
All this had left a lotof liquidity sloshing around in the market.
Meanwhile, inflationremained at around 2.79 percent for 2019, down from 3.5 percent in 2018 and much lower than the targetof 4 percent set for 2019.
Besides all this, thecentral bank has a few extra tools now to streamline money flows.
With effect fromNovember 1, for instance, the money raised by issuing bonds now has to be keptin a Treasury account with the State Bank of Vietnam instead of depositing at State-ownedbanks like BIDV and Vietcombank.
Tax revenues, hithertokept in the Treasury’s collection/payment accounts with banks, are now kept inthe Treasury Single Account (TSA) at the SBV. The TSA is the account into whichall revenues of all government agencies go.
This means the centralbank sits on a pile of cash it can readily inject into the market to bring downinterest rates as it sees fit.
Many analysts have thussuggested that bank lending interest rates could be cut by 0.75-1 percentagepoint in 2020./.
Low inflation, steadyforeign exchange rates and tools available to the State Bank of Vietnam (SBV) to monitor money flowsare among the factors that will enable credit institutions to cut the interestrates.
Hoang Minh Hoan, deputy director of the Sai Gon Commercial Joint Stock Bank,said the current exchange rate stability, record high foreign exchangereserves, solid economic growth, and faster credit growth than deposit growthare likely to drive the cuts.
The liquidity availablein the banking sector and lower refinancing and discount rates are alsofactors, according to Hoan.
Generally speaking,most current macroeconomic factors support the stability of interest rates,which allows lenders to reduce them after the Lunar New Year.
Ngo Dang Khoa, country head of globalmarkets at HSBC Vietnam, agreed with Hoan, saying that the Vietnamese dong remains one of the most stable currencies in theregion despite the global political instability and economic events at home.
He said its valueagainst the US dollar remained virtually unchanged through 2019, sometimes evenappreciating as the central bank actively intervened.
This and the FDIflowing into Vietnamenabled it to buy huge amounts of dollars, thus increasing the country’sforeign exchange reserves to a record 73 billion USD on October 30.
Through the course ofthe year it bought 16 billion USD.
Besides, the tradesurplus in the first 11 months of the year was a record 9.1 billion USD.
The World Bankestimated overseas remittances to Vietnam in 2019 to reach 16.7 billion USD, up 4.6 percent from theprevious year.
Credit growth for theyear was only 12.1 percent while deposit growth was 12.5 percent.
All this had left a lotof liquidity sloshing around in the market.
Meanwhile, inflationremained at around 2.79 percent for 2019, down from 3.5 percent in 2018 and much lower than the targetof 4 percent set for 2019.
Besides all this, thecentral bank has a few extra tools now to streamline money flows.
With effect fromNovember 1, for instance, the money raised by issuing bonds now has to be keptin a Treasury account with the State Bank of Vietnam instead of depositing at State-ownedbanks like BIDV and Vietcombank.
Tax revenues, hithertokept in the Treasury’s collection/payment accounts with banks, are now kept inthe Treasury Single Account (TSA) at the SBV. The TSA is the account into whichall revenues of all government agencies go.
This means the centralbank sits on a pile of cash it can readily inject into the market to bring downinterest rates as it sees fit.
Many analysts have thussuggested that bank lending interest rates could be cut by 0.75-1 percentagepoint in 2020./.
VNA
