JBA’s eased monetary concern
JBA’s eased monetary concern
Japanese companies in Vietnam have warned the government’s loosened monetary policy could result in the return of high inflation and exchange rate tension.
The Japan Business Association in Vietnam (JBAV) chairman Motonobu Sato said at the Vietnam Business Forum last week that the government recently adopted a loosening monetary policy to control the economic situation.
“We understand that with the loosened monetary policy, the government wants to support Vietnamese companies in seeking loans from banks,” Sato said.
“But, our biggest concerns are that high inflation and shortage of dollars may come back again,” he said.
The State Bank in March lowered the deposit interest rate from 9 to 8 per cent and in May it continued to cut the rate to 7 per cent.
As a result, many banks like Techcombank, Southern Asia Bank, PG Bank, Dai A Bank, Tienphong Bank and Eximbank have reduced annual lending rates to 8.25, 9.43, 10, 10, 9.7 and 9.2 per cent, respectively. Vietcombank’s deposit interest rate also dropped to 6 per cent last month.
The Ministry of Planning and Investment (MPI) said in a bid to revitalise local production, the government would find ways to boost credit growth to a targeted 12 per cent rate for 2013.
During this year’s first five months, credit expansion rate touched 2.29 per cent only.
Sato said Vietnam’s economy up to 2011 witnessed a local currency depreciation against the dollar due to the trade deficit. This trend saw a depreciation of the dong and high inflation, while local companies struggled to buy dollars, because they had to purchase materials in dollars and sell to domestic companies in dong.
In February 2011, the government issued Resolution 11 to tighten the monetary policy and strangle the black market to stabilise the macroeconomy.
According to the JBAV, despite decreases in lending rates now, local enterprises were unable to absorb new capital.
Meanwhile, it said the major reason for Vietnam’s high inflation was state-owned enterprises’ ineffective use of capital and these enterprises’ monopoly over petrol and electricity, as well as ineffective public investment.
MPI deputy minister Dao Quang Thu however said in response to foreign investors’ concern at the VBF that with Vietnam’s foreign currency reserve equivalent to more than 12 weeks of import, there should be no fear of dollar shortage to satisfy businesses’ demand.
“The Vietnamese government commits to create all best conditions for investors to change the dong into foreign currencies,” he said.
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