Domestic, int’l factors aid rate cut
Domestic, int’l factors aid rate cut
According to the National Financial Supervisory Commission, many supporting factors in both the domestic and international markets could help an interest rate cut until the year-end.
Firstly, the commission said, the pressure from the exchange rate is not too large, as the US dollar has devalued by more than 7 per cent since early this year, and the chance to raise interest rates this year from the US Federal Reserves is less than 50 per cent.
Secondly, inflation is more likely to stay below the National Assembly’s target of 4 per cent.
Thirdly, the country successfully issued 75 per cent of the Government bonds planned for the entire 2017, and the G-bond yield decreased by 0.2 percentage points to 0.3 percentage points compared with the end of June, and 1 percentage points compared with the same period in 2016. Hence, it would facilitate the reduction of interest rates in the banking sector.
According to the commission, thanks to the positive movements in interest rates when the deposit interest rates are stable, lending has so far grown positively. Credit growth by the end of July 2017 was 9.3 per cent, compared with the end of 2016.
The lending structure by currency also continued to remain stable with loans in the dong accounting for 91.7 per cent of the total outstanding loans.
Despite the rapid increase in lending, the liquidity of the banking system has been plentiful and inter-bank rates fell to the lowest level, since the beginning of the year. As a result, the State Bank of Viet Nam (SBV), in the first seven months of the year, withdrew VND48.6 trillion (US$2.13 billion) via the open market operations (OMO).
According to the commission, liquidity is plentiful because the SBV bought a significant amount of foreign currency to increase the foreign exchange reserves, thereby increasing the supply of dong to the market. According to the latest data released by SBV Governor Le Minh Hung, foreign exchange reserves are currently over $42 billion.
However, the commission noted that the proportion of medium- and long-term loans decreased to 53.9 per cent against 55.1 per cent at the end of 2016, while short-term credit accounted for 46.1 per cent against 44.9 per cent at the end of 2016.
