Review of economic information from June 10 to 14

The central exchange rate increased by 8 VND, the index decreased by 7.67 points or by the end of May, credit increased by 2.41% compared to the end of 2023 (equivalent to an increase of 12.8% over the same period)... are some notable economic information in the week from June 10 to 14.

Economic news review

Overview

The credit growth rate in May 2024 was more positive, showing signs of recovery in credit demand. However, considering the general context, the ability to achieve the credit growth target of 15% in 2024 is still quite difficult.

According to information from the State Bank of Vietnam, by the end of May, credit increased by 2.41% compared to the end of 2023 (equivalent to an increase of 12.8% over the same period). Outstanding credit has increased by nearly VND 327 trillion from the beginning of the year to the reporting date.

According to experts, the credit growth at the above level is in line with the demand and capital absorption capacity of the economy. In addition, credit is also recovering clearly, with growth in each month higher than the previous month. If we count the first two months of the year, credit only increased by 0.02%, it has now increased by 2.41%.

Since the beginning of the year, the Government and the State Bank have issued many policies and documents to support credit promotion. Typically, the State Bank issued Document No. 10167/NHNN-CSTT dated December 31, 2023, assigning the entire credit growth target of 15% to commercial banks from the beginning of the year, which is the basis for banks to proactively establish long-term and more flexible business plans.

The Prime Minister issued Official Dispatch No. 18/CD-TTg dated March 5, 2024 on credit growth management in 2024 and chaired the Conference on implementing monetary policy management tasks in 2024 to orient the implementation of solutions for safe, effective, correct and targeted credit growth; directing credit to production and business sectors, priority sectors and economic growth drivers.

The State Bank also issued Circular 02/2023/TT-NHNN dated April 23, 2024 on restructuring debt repayment terms and maintaining debt groups to support customers in difficulty, helping businesses reduce financial pressure, debt repayment pressure and bad debt when restructured and not having to change debt groups, while continuing to access new loans (due to keeping the debt group), helping businesses and borrowers have capital to maintain production, business and investment; at the same time, contributing to helping credit institutions reduce pressure on risk provisioning. Circular 02 will expire at the end of June 2024, however, to have more time to help businesses repay debts and banks make full provisions, the State Bank has reported to the Government and the Prime Minister to extend this Circular until December 31, 2024.

Recently, on May 29, 2024, the State Bank of Vietnam also issued Document No. 4462/NHNN-CSTT to credit institutions requesting the implementation of a number of solutions on credit and interest rates. In particular, the operator requested credit institutions to continue their efforts to reduce lending interest rates by 1-2% by reducing costs, simplifying lending procedures, increasing the application of information technology and digital transformation in the lending process; at the same time, focusing credit on traditional growth drivers, emerging industries, green transformation, circular economy, social housing... to support businesses and people to develop production and business, increasing access to bank credit capital.

In fact, banks not only maintain stable lending interest rates, but also actively launch many preferential loan packages for different groups of businesses, expanding access to capital. At the same time, banks also shorten procedures, introduce new features such as online disbursement and guarantee issuance... to promote credit.

However, it can be seen that the credit disbursement figure of VND327 trillion in nearly 5 months is still quite far from the target of about VND2 million billion expected to be put into the economy in 2024. At the same time, experts commented that the target of credit growth of 5-6% in the first half of the year, meaning that there is only more than 1 month left for credit to increase by more than 3%, is very difficult to achieve. Accordingly, the ability to achieve the target for the whole year is also the same, because the economy is recovering slowly, the demand for credit capital is not high, the purchasing power in the market is still weak, and businesses are not interested in using loans to expand production and business.

Meanwhile, the general sentiment of credit institutions is to remain very cautious, ensuring the safety of each loan. The bad debt ratio of the banking system is on the rise, exceeding the prescribed threshold, while the bad debt coverage ratio tends to fall below the 100% threshold, showing that banks are under pressure to increase provisions to compensate for the financial safety index showing signs of decline.

Regarding interest rates, in the coming time, experts believe that deposit interest rates in the market will remain stable or may increase slightly at some points when capital demand increases. However, many banks said they will try to stabilize lending rates to attract businesses.

Domestic market summary from June 10 - 14

In the foreign exchange market during the week of June 10-14, the central exchange rate was adjusted up and down slightly by the State Bank. At the end of June 14, the central exchange rate was listed at 24,249 VND/USD, a slight increase of 08 VND compared to the previous weekend session.

The State Bank of Vietnam's transaction office continues to list the USD buying and selling rate at 23,400 VND/USD, and the spot selling rate at 25,450 VND/USD in all sessions.

The interbank USD-VND exchange rate fluctuated slightly during the week from June 10 to 14. At the end of the session on June 14, the interbank exchange rate closed at 25,454 VND/USD, up 54 VND compared to the previous weekend session.

The dollar-dong exchange rate on the free market increased again last week. At the close of the session on June 14, the free exchange rate increased by 150 VND for buying and 140 VND for selling compared to the previous weekend session, trading at 25,730 VND/USD and 25,810 VND/USD.

Interbank money market from June 10 to 14, interbank VND interest rates increased sharply in most sessions except for a sharp decrease at the end of the week for all terms. Closing on June 14, interbank VND interest rates were traded around: overnight 4.45% (+0.35 percentage points); 1 week 4.58% (+0.20 percentage points); 2 weeks 4.73% (+0.21 percentage points); 1 month 4.90% (+0.07 percentage points).

Interbank USD interest rates remained little changed last week. On June 14, the interbank USD interest rate closed at: overnight 5.27% (-0.03 percentage points); 1 week 5.33% (-0.02 percentage points); 2 weeks 5.39% (+0.01 percentage points) and 1 month 5.41% (-0.02 percentage points).

In the open market last week from June 10 to 14, in the mortgage channel, the State Bank of Vietnam offered 7-day term with a volume of VND 15,000 billion, interest rate kept at 4.5%. There were VND 5,106.84 billion in winning bids and VND 12,905.41 billion in maturity last week.

The State Bank of Vietnam offered 28-day SBV bills for auction, bidding on interest rates in all sessions. At the end of the week, a total of VND7,350 billion was won, with the winning interest rate remaining at 4.25%; VND6,000 billion of bills matured last week.

Thus, the State Bank of Vietnam net withdrew VND 9,148.57 billion from the market last week through the open market channel, the volume circulating on the mortgage channel was VND 5,106.84 billion and the volume of circulating treasury bills was VND 68,710 billion.

On June 12, the State Treasury successfully called for bids of VND5,570 billion/VND8,500 billion of government bonds, equivalent to a winning bid rate of 66%. Of which, the 5-year and 10-year terms mobilized the entire bid volume, VND1,000 billion and VND4,500 billion respectively, the 30-year term mobilized VND70 billion/VND500 billion of the bid volume. The 15-year and 20-year terms called for bids of VND2,000 billion and VND500 billion respectively, but there was no winning bid volume. The winning interest rate for the 5-year term was 1.83% (+0.03 percentage points compared to the previous auction), the 10-year term was 2.74% (+0.08 percentage points) and the 30-year term was 3.10% (unchanged).

This week, June 19, the State Treasury plans to bid for VND8,000 billion in government bonds, of which VND1,000 billion will be offered for 5-year terms, VND5,000 billion for 10-year terms, VND1,500 billion for 15-year terms, and VND500 billion for 30-year terms.

The average value of Outright and Repos transactions in the secondary market last week reached VND12,276 billion/session, a sharp decrease compared to VND16,774 billion/session of the previous week. Government bond yields last week decreased slightly across all maturities. At the close of the session on June 14, government bond yields were trading around 1-year 1.86% (-0.004 percentage points compared to the previous week); 2-year 1.88% (-0.004 percentage points); 3-year 1.90% (-0.004 percentage points); 5-year 1.97% (-0.03 percentage points); 7-year 2.28% (-0.02 percentage points); 10-year 2.79% (-0.02 percentage points); 15-year 2.99% (-0.01 percentage points); 30 years 3.19% (-0.002 percentage points).

The stock market in the week from June 10 to 14 increased in the first sessions of the week but decreased sharply in the last session of the week. At the end of the session on June 14, VN-Index stood at 1,279.91 points, down 7.67 points (-0.60%) compared to the end of the previous week; HNX-Index lost 1.02 points (-0.42%) to 243.97 points; UPCom-Index fell 0.81 points (-0.82%) to 98.05 points.

Average market liquidity reached nearly VND26,300 billion/session, a slight improvement compared to VND24,400 billion/session of the previous week. Foreign investors continued to net sell nearly VND4,000 billion on all three exchanges.

International News

The World Bank (WB) predicts that the world economy may have a soft landing, but it also means that interest rates will stay high for a long time. In a report released on June 11, WB forecasts global GDP to grow by 2.6% in 2024 (+0.2 percentage points compared to the January forecast) and 2.7% in 2025 (unchanged).

In this forecast, in developed economies, US GDP in 2024 is revised up sharply to 2.5% (+0.9 percentage points), and to 1.8% next year (+0.1 percentage points); Eurozone GDP increases by 0.7% (unchanged) and 1.4% (-0.2 percentage points), respectively; Japan's GDP increases by 0.7% (-0.2 percentage points) and 1.0% (+0.2 percentage points), respectively. Next, in developing economies, China's GDP is forecast to increase by 4.8% this year (+0.3 percentage points) and 4.2% next year (-0.2 percentage points); India increases by 6.6% (+0.2 percentage points) and 6.7% (+0.2 percentage points). In Southeast Asia: Indonesia increases by 5.0% (+0.1 percentage points) and 5.1% (+0.1 percentage points), respectively; Thailand increased by 2.4% (-0.8 percentage points) and 2.8% (-0.3 percentage points).

For Vietnam, the World Bank forecasts GDP growth of 5.5% this year and 6.0% in 2025, unchanged from the previous forecast. The World Bank believes that the global economy is stabilizing after many years of negative shocks. However, the general trend of inflation decline is slowing, causing central banks in advanced and emerging economies to remain cautious, and high interest rates after the pandemic will last longer than expected.

In addition, the WB warned that escalating geopolitical tensions could lead to volatility in commodity prices, especially during times when trade policies between countries become uncertain.

The US Federal Reserve (Fed) forecasts the economy, inflation and the path of policy interest rates at its June meeting, in addition to a number of important economic indicators. At the meeting held on June 12, the Fed said that economic activities have expanded at a solid pace recently. Inflation has eased over the past year but remains high. Progress toward the 2.0% target in recent months has been more modest than before.

According to the Fed's median forecast, in 2024 and 2025, the US GDP growth rate will be 2.1% and 2.0%, respectively (both unchanged from the March forecast); the unemployment rate will be 4.0% (unchanged) and 4.2% (+0.1 percentage point), respectively; the total PCE price index will be 2.6% (+0.2 percentage point) and 2.3% (+0.1 percentage point), respectively; the core PCE will be 2.8% (+0.2 percentage point) and 2.3% (+0.1 percentage point).

Importantly, the Fed forecasts the policy rate to be around 5.1% at the end of 2024 (+0.5 percentage point) and 4.1% in 2025 (+0.2 percentage point). This means there will be only one policy rate cut in 2024, down from the three cuts previously forecast.

In a press conference after the meeting, Fed Chairman Jerome Powell said that the agency is not confident about easing monetary policy at the present time, but there is no longer any opinion that it is necessary to increase policy interest rates in the future.

Regarding the US economy, the headline CPI and core CPI in the US were flat and up 0.2% month-on-month in May, down from a 0.3% increase in April and lower than forecasts of 0.1% and 0.3% increases, respectively. Compared to the same period in 2023, headline CPI increased 3.3% and core CPI increased 3.4%.

Next, the US PPI and core PPI fell 0.2% month-on-month and were flat in May after rising 0.5% in the previous month, both weaker than forecasts of 0.1% and 0.3%, respectively. Compared to the same period in 2023, the headline PPI and core PPI rose 2.2% and 3.2%, respectively, unchanged from the 2.3% and 3.2% increases in April.

Finally, the University of Michigan surveyed the US consumer confidence index at 65.6 points in June, down from 69.1 points in May and contrary to the forecast of an increase to 72.1 points.

Source: https://thoibaonganhang.vn/diem-lai-thong-tin-kinh-te-tuan-tu-10-146-152653-152653.html