16-6-2023 (HANOI) The State Bank of Vietnam (SBV) announced on Friday its plan to reduce several policy interest rates by 50 basis points starting next Monday. This move comes as Vietnam seeks to bolster its export-driven economy through increased stimulus measures.
In an online statement, the SBV outlined the rate cuts, with the refinancing rate set to be lowered to 4.5 percent, the discount rate to 3 percent, and the overnight electronic interbank rate to 5 percent.
Additionally, the central bank revealed its intention to decrease the maximum interest rates that commercial banks can offer on Vietnamese dong deposits with maturities ranging from one to six months. The new cap will be set at 4.75 percent, down from the previous rate of 5 percent.
Experts have widely anticipated these adjustments, which are primarily aimed at encouraging lending to households and businesses. Vietnam’s economic growth has slowed due to a decline in exports and a contraction in the real estate market.
According to the SBV, credit growth in the banking system during the first five months of this year increased by 3.17 percent compared to the end of last year. However, this growth rate is lower than the approximately 8 percent seen during the same period last year.
To counter the economic challenges, Vietnam’s central bank has already implemented four policy interest rate cuts this year. In addition, last month, it mandated that commercial lenders restructure loans until June 2024. This restructuring includes providing up to 12 months of loan repayment deferrals for businesses facing difficulties amidst the economic slowdown.
The General Statistics Office reported that Vietnam’s economy grew by 3.32 percent in the first quarter, a slowdown from 5.92 percent growth in late 2022 and 5.03 percent in the first quarter of last year.
Furthermore, Vietnam’s exports from January to May declined by 11.6 percent compared to the same period the previous year. Weak demand in key export markets has adversely affected major industries such as smartphones, electronics, garments, footwear, and wooden products.
