A transaction at Vietcombank (Photo: VNA)However, the slow disbursement of public investment helped increase theState Treasury’s deposits in commercial banks, reducing pressure on interestrates.
Theassessment was made by Dr. Nguyen Duc Thanh, Director of the Vietnam Institutefor Economic and Policy Research (VEPR) at a ceremony in Hanoi on July 10 toannounce VEPR’s macro-economy report for the second quarter of 2017.
Accordingto VEPR, by June 20, 2017, credit growth reached 7.54 percent compared to thatin December last year, the highest figure recorded in the past six years. Particularly,credit saw the fastest growth pace in the second quarter, showing theGovernment’s determination to fulfill the set growth target.
Meanwhile,deposit growth slumped compared to the same period of 2016, reaching only 5.89percent. However, interest rates in the interbank market still fell strongly inthe second quarter. The overnight rate dropped 3.24 percentage points comparedto the previous quarter to 1.47 percent averagely in June 2017, while the weeklyinterest rate also plummeted to 1.84 percent.
TheState Treasury’s deposits in the banking system are considered a main reasonbehind the high liquidity in the market, according to VEPR.
Thelatest report of the National Committee on Financial Supervision showed that theState Treasury’s deposits in banks by the end of April reached 122 trillion VND(around 5.37 billion USD), a rise of 28.4 percent compared to the beginning of thisyear. This also reflected slow disbursement of public investment, said thereport.
Atthe same time, deposit interest rates remained stable with only slight rises insome long-term deposits in big commercial banks, maintaining at 6.4-7.2percent. Interest rates for middle-term and short-term were from 4.5-5.4percent and 5.4-6.5 percent per year, respectively.
Theseconditions and the low inflation prompted the State Bank of Vietnam to cutprime interest rate by 0.25 percentage points and lower the ceiling lendinginterest rate by 0.5 percentage points. The move is expected to help interestrates drop further in the coming time, according to the report.
VEPRexperts held that this is a proper decision that facilitates the development ofbusinesses.
However,Dr. Nguyen Duc Thanh noted that the fast expansion of money supply led to a highM2/GDP ratio, standing at 146 percent, while the figures were 80 percent in2006 and 114 percent in 2010.
Healso warned of higher inflation in the coming time when the loosing currencypolicy affects the economy.-VNA
VNA
