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ANZ: Vietnam may slash basic interest rate
Australia and New Zealand Banking Group (ANZ), in its latest report about Vietnam’s economy released on May 13, mentioned the possibility the State Bank of Vietnam would loosen monetary policies further.
ANZ said that since the global financial crisis broke out, the State Bank of Vietnam (SBV) has been one of the central banks most actively loosening monetary policies.
In February 2009, SBV stopped loosening monetary policies when the government launched the 4% interest rate subsidy programme. In April 2009, SBV, once again, lowered the refinance and discount interest rates to 7% and 5%, respectively.
Despite the fact that the central bank has been loosening monetary policies, inflation has still been decreasing.
ANZ has predicted that SBV will cut the basic interest rate by another 50 percentage points by mid 2009, to be sure that the monetary conditions are favourable enough to support growth recovery in 2009.
However, the banking group said that this still depends on the strength of inner factors. It stressed that the interest rate cut would help cut the borrowing costs of the government.
ANZ also thinks that government agencies will keep the local currency weak to encourage exports.
While ANZ believes that SBV will slash the basic interest rate, domestic economists think that the central bank will either raise the rate or keep it stable.
Prof Dr Tran Ngoc Tho, Dean of Corporate Finance Faculty under the HCM City Economic University, said that the basic interest rate might be raised again. High inflation could return in this context, when Vietnam is pumping more money into circulation. Moreover, bank interest rates need to increase to ensure that banks can mobilise idle capital from the public.
The reports by commercial banks submitted prior to May 7 showed that the outstanding loans by commercial banks under the interest rate subsidy programme had reached VND271,943 billion.
Meanwhile, Nguyen Duc Tai, Director of the HCM City Transaction Centre of DongA Bank, believes that the basic interest rate will be kept stable in the upcoming months, even though deposit interest rates are tending to increase.
VietNamNet, TBKTVN, DTCK
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