State bank cuts interest rates to spur growth
State bank cuts interest rates to spur growth
Viet Nam's credit growth as of March 13 was negative 1.05 per cent against the end of 2013.
Even so, the State Bank of Viet Nam (SBV) insists on targeting credit growth of 12 to 14 per cent for the year 2014.
Head of SBV's Monetary Policy Department Nguyen Thi Hong, while delivering the message in the monthly press meeting yesterday in Ha Noi, stressed that the central bank was actively implementing policies to control inflation, promote economic growth and ensure the system's liquidity.
As of March 13, the total money supply increased 2.96 per cent compared with the end of last year. Deposits grew 1.92 per cent, in which dong deposits were up 2.23 per cent, but dollar deposits were down 0.09 per cent.
Yesterday, SBV cut policy interest rates cautiously by 0.5 percentage point, making the decision the first of its kind in nine months to support business.
The rate was a little lower than the 1 percentage point cut which had been expected.
Accordingly, the refinancing rate now is 6.5 per cent, the discount rate is 4.5 per cent and the overnight rate is 7.5 per cent.
The interest rate cap for commercial dong deposits of less than six-month terms was slashed to 6 per cent from 7 per cent. No cap has been set for longer-term deposits.
The cap for the USD deposit interest rate was also cut by approximately 0.25 percentage point across the board.
The cap for the privileged lending interest rate has been set at 8 per cent for short-term loans in Vietnamese dong, down by 1 per cent.
Market observers argued that when the conditions are better, the central bank may make an additional 1 to 2 per cent cut in borrowing costs in dong. Late last month, Prime Minister Nguyen Tan Dung had directed the central bank to facilitate credit growth and quickly inject capital into the economy.
Previously, there was a growing demand from economists for lower interest rates to help capital-thirsty companies, struggling production and stagnant investment nationwide.
In the first two months of this year, over 13,100 enterprises suspended operations, up 12.2 per cent year on year, according to the Ministry of Planning and Investment. Of these, 1,900 enterprises were dissolved and 11,200 enterprises suspended operations.
Meanwhile, the number of newly-established enterprises was 10,900, which was lower than the companies which shut shop.
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