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Gov’t may lower targeted GDP growth rate to 6.7%: Governor
The Governor of the State Bank of Vietnam, Nguyen Van Giau, said that the Government is going to propose lowering the targeted GDP growth rate to 6.5-6.7% instead of 6.5-7%. The newly promulgated interest rate policy has been designed based on the new target.
One day after the State Bank of Vietnam announced the interest rate cuts and compulsory reserve decrease, commercial banks have slashed their lending interest rate to 15%. The exchange rates quoted by commercial banks remain stable, while the rate on the black market has exceeded VND 17,000/US $1.00 threshold. Governor Nguyen Van Giau talks about the new changes.
Why has the State Bank of Vietnam been continuously cutting basic interest rates and trying to support banks improve their liquidity in the last two weeks after it tightened the monetary policies for many months?
The US financial crisis has become more serious since September 15, which has spread out to other developed countries. The International Monetary Fund (IMF) has predicted there is a slowdown in the world’s economic growth. It is forecasted that the economic growth rate would be 3.9% by the end of the year and is expected to decrease to 3% the following year, after the rate was 5% in 2007. The worsened situation has forced countries to take action to prevent any bad impacts of the crisis.
As for Vietnam, in the first months of the year when the inflation rate was high, we prioritized the fight against inflation. The inflation has been controlled since June. The consumer price index (CPI) only rose by 0.18% in September over the previous month, and it even decreased by 0.19% in October. In the new conditions, we decided to cut the basic interest rate by 1% on October 20.
At October’s Government meeting, the Government discussed and agreed to propose the National Assembly to approve the lowered targeted GDP growth rate of 6.5-6.7% for this year, instead of 6.5-7% as previously planned. Therefore, we have decided to slash the basic interest rate by another 1%, effective as of November 5.
How has the monetary market responded to the new package of measures?
I can see the active responses from investors and commercial banks after the decisions were released. Most of state owned banks have slashed their interest rates, now lending at 15-16%, or 2% lower than the ceiling level (the highest rate once reached 21% per annum – reporter).
I believe that the initial responses are active, which will help remove difficulties of enterprises.
A paradox exists that banks now have capital in excess, but they keep hesitant in lending and businesses are still thirsty for capital. What do you think we should do to settle the problem?
In the difficult conditions of the national economy, banks tend to keep cautious to prevent risks. Only when businesses have good projects they can access bank loans.
The reports from 30-40 provinces and cities sent to me in the last three days showed that 90% of the applications for borrowing money from banks have been accepted, while the other 10% have been rejected for many reasons, mainly because of the unfeasibility of the projects
Will the State Bank consider slashing interest rates further if businesses still have big difficulties in production and export?
The interest rate must be decided by the supply and demand basis. The State Bank of Vietnam cannot give orders to commercial banks.
On November 4, one day after the central bank announced the new package of measures, the VND/US$ exchange rate on the black market exceeded VND17,000/US $1.00 threshold. Could you please tell me why?
This is the weak point of the state management, of the market management agencies.
VNE, Vietnamnet
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