Dong surplus emerges as banks boost rates
Some Vietnamese banks increased their deposit rates in the past week to help raise dong funds above minimum reserve requirements.
Banks raised one-year dong deposit rates to 17.3-19.1 percent from a week-earlier range of 17 percent to 18.5 percent, the State Bank of Vietnam, or the central bank, said in its monetary market review.
The country’s top four lenders widened one-year dong lending rates to 15-20 percent from 15-18 percent in late June.
Overnight lending rates rose slightly to between 14-18 percent from 14-16 percent on June 30.
Other banks mostly offered loans at the ceiling level of 21 percent, the central bank said.
By end of last week, larger banks reported a surplus against their reserves kept at the central bank, the review said, while smaller banks found it hard to meet the reserve requirement in place since February and some unidentified banks even failed to meet the requirement.
The central bank said it continued buying short-term debt via open market transactions to ensure liquidity and help banks meet strong corporate demand.
The central bank said foreign exchange spot rates quoted between banks and those on the unofficial market had reduced significantly.
The dollar fell to VND17,050-17,150 on July 10 on the free markets from VND17,250 on July 7, while interbank markets kept the hard currency stable at VND16,840-16,849 last week.
The central bank said banks have sold foreign currencies to individuals to help with their overseas medical treatment, study or business trips, while the central bank has also tightened rules on how forex dealing agents can operate.
Vietnam’s central bank has raised interest rates three times this year and reduced money supply to help contain double-digit inflation in place every month since last November.
From February 1, it also raised banks’ compulsory reserves to 11 percent of their dollar and dong deposits of up to 12 months, from 10 percent.
The reserves for dong and dollar deposits longer than 12 months rose to 5 percent from 4 percent.
Gross domestic product in the first half of the year rose 6.5 percent compared with a year earlier, a growth rate that is lower than a full-year target of 7 percent.
Last month a central bank official said rate cuts might take place in August to support businesses, given the government is expected to contain the rise in Vietnam’s consumer prices.
But financial analysts were skeptical the central bank would have room to cut rates.
“Going forward, growth will likely come under further pressure in 3Q 2008, with no monetary policy loosening or fiscal stimulant in sight,” Goldman Sachs analyst Helen Qiao said in a note Monday, referring to the third quarter.
“Given persistent inflationary pressures, it is unlikely that the Vietnamese government will loosen monetary policy or halt the fiscal expenditure cut before a clear downward trend in CPI inflation is in place,” she said.
Goldman Sachs cut its forecast for Vietnam’s 2008 growth to 6.9 percent from 7.3 percent previously, close to the government’s revised target of 7 percent, from 8.5-9 percent previously.
In its report titled “Vietnam Economics: Reining In the Tiger Cub” issued on June 20, Morgan Stanley said: “We expect GDP growth to slow sharply, to 5.5-6 percent by 2009 from 7.5 percent in 2008 and 8.5 percent in 2007.
Full-year GDP growth will probably be 6.5 percent, below the government’s revised target of 7 percent.”
Thanhnien
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