Flexible adjustment of monetary policies
After the regular Government meeting in August 2023, the Government issued Resolution 144/NQ-CP, which included an important content requiring the State Bank of Vietnam (SBV) to review and adjust the risk coefficients of different real estate segments.
Resolution 144 also requires reviewing regulations related to lending and investing in corporate bonds to ensure consistency and compliance with the policy of developing the corporate bond market.
The Government also requested the SBV to continue to strive to reduce lending interest rates; monitor the implementation of Circular No. 02/2023/TT-NHNN and Circular No. 03/2023/TT-NHNN to promptly guide and remove arising problems.
In addition, the State Bank must have solutions to continue to promote the disbursement of credit packages of 40 trillion VND to support interest rates, 120 trillion VND for social housing loans, and 15 trillion VND for the forestry and fishery sectors.
Resolution 144 is considered a strong solution to increase money supply for the economy , including the real estate sector, to break the ice that hinders the economic growth recovery process.
Previously, under the direction of the Government, the State Bank of Vietnam suspended the implementation of a number of regulations on lending under Circular 06. Specifically, it suspended Clauses 8, 9 and 10, Article 8 of Circular No. 39/2016/TT-NHNN (supplemented by Clause 2, Article 1 of Circular No. 06/2023/TT-NHNN).
This move is considered a solution to support the restructuring process of real estate businesses.
In fact, Clauses 8, 9 and 10 of Circular 06 were issued with the ultimate purpose of controlling credit quality through efforts to control the purpose of capital use of customers, in order to ensure the safety of the credit institution system.
However, currently up to 90% of projects are facing difficulties and are not eligible for loans under Circular 06. The abolition of some provisions of Circular 06 will help businesses, investors and people have the opportunity to access credit from now until the end of the year.
In the first 3 months of 2023, the Government also issued Decree 10 to help remove administrative bottlenecks for real estate project investors, Decree 08/2023 on corporate bonds, Resolution 33 on a number of solutions to remove bottlenecks in the real estate market or Decision 388 on the social housing development project,...
These are all solutions to clear the deadlock in the real estate market - a very important sector of the economy.
The real estate market has been sluggish since mid-2022 when bank interest rates increased. Access to capital for real estate is difficult due to low liquidity of real estate and banks do not prioritize real estate loans; even if businesses and individuals can borrow, they still have to hesitate because the interest rate at that time was around 13-15%/year.
Since the beginning of 2023, the State has introduced solutions to restore and develop the real estate market, in order to promote economic growth. However, although interest rates have decreased and access to capital has become easier, credit growth remains low, due to capital flow being blocked, and investor and public sentiment remaining pessimistic about the recovery of the economy and the real estate industry.
However, interest rates have recently decreased rapidly and with this trend, the real estate market in particular and the economy in general will benefit a lot.
Regarding interest rates, in the first half of 2023, the SBV has reduced the operating interest rate four times with a total reduction of about 150-200 points: rediscount rate from 4.5% to 3%; refinancing rate from 6% to 4.5%; and interbank overnight rate from 7% to 5%. The purpose is to support growth through the credit channel. This is the next move to reduce the cost of capital for businesses and households, thereby encouraging the business environment and supporting consumer sentiment.
Boosting public investment
Besides monetary policy, the Government also promotes public investment activities with very large projects.
On August 31, Prime Minister Pham Minh Chinh pressed the button to start construction on two important packages of the Long Thanh International Airport super project, phase 1, including the passenger terminal and construction and installation of equipment for the runway and aircraft parking lot, with a total investment of more than VND42,000 billion.
This is a huge effort to build the largest airport in the country (capacity to serve 100 million passengers and 25 million tons of cargo per year), expected to be put into operation in 2025 with the aim of economic development, including tourism.
In early September, the Prime Minister also requested the Ministry of Industry and Trade to strive to start construction of component projects of the 500kV line 3 project from Quang Trach - Quang Binh to Pho Noi - Hung Yen with a total investment of VND 23,000 billion this September.
The project aims to ensure electricity supply for production, business and people's consumption, avoiding power shortages like in the summer of 2023.
Minister of Industry and Trade Nguyen Hong Dien also requested Vietnam Electricity Group (EVN) to urgently work and agree with localities to speed up site clearance; the project must be completed and put into operation by June 2024 at the latest.
At the end of June, Prime Minister Pham Minh Chinh attended and gave the order to start the construction of the Ring Road 4 project in the capital region, passing through 3 provinces and cities of Hanoi, Hung Yen and Bac Ninh with a total length of nearly 113km, and a total investment of more than 85.8 trillion VND. The above project will contribute to relieving the current traffic congestion in the capital, at the same time creating regional connections with other provinces and creating new development space for places with room for development but traffic congestion.
Many large public investment projects have been started in all provinces and cities. Construction of highways, airports, seaports, etc. continues to be accelerated, including the North-South Expressway.
According to the plan, public investment capital in 2023 is about 711,000 billion VND. In the first 7 months of the year, the estimated disbursement of public investment capital reached nearly 268,000 billion VND, reaching 35.49% of the plan.
Besides the interest rate reduction, many experts appreciate the account policy.
Ms. Tran Thi Khanh Hien, Director of MBS Analysis Department, said that the best solution in 2023 is to boost public investment, focusing on accelerating disbursement progress for a number of projects, such as the Long Thanh Airport project.
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Manh Ha
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