Reduce interest rates, balance benefits

SGGP 03/04/2023 11:08

Talking to SGGP Newspaper about the series of articles "High interest rates exhaust the economy ", many experts said that interest rates in Vietnam are currently too high and need to be reduced to support people and businesses to recover and develop production and business.

Customers come to transact at VPBank . Photo: MINH HUY

- Associate Professor, Dr. NGUYEN THUONG LANG, National Economics University:

Interest rate increase is quite urgent.

Vietnam has just shown signs of inflation but has already raised interest rates. This solution is correct, but it was implemented quite hastily in the context of many businesses in the recovery phase after the pandemic, so it caused shock. The interest rate increase caused many difficulties and increased business costs, slowing down the implementation of the 2% interest rate support package.

High interest costs reduce competitiveness and reduce the ability of businesses to recover. Currently, inflation has been effectively controlled. Reducing interest rates combined with implementing a 2% interest rate support package will create the ability to expand investment and business operating capacity. This is necessary and needs to be implemented urgently, if left too long, it will cause economic stagnation.

- Mr. NGUYEN QUOC HUNG, General Secretary of Vietnam Banking Association:

Reduce deposit interest rates to reduce lending interest rates

Credit institutions have just agreed to reduce deposit interest rates, using that as a basis to reduce lending interest rates for customers. The reduction in deposit interest rates will fluctuate between 0.2-0.5 percentage points compared to the current deposit interest rate. I think this is a trend that needs to be taken into account this year, which is to reduce deposit interest rates. Most banks want to reduce deposit interest rates, but people want to deposit money at high interest rates, so some banks have to increase deposit interest rates so that depositors do not withdraw money. Therefore, it is necessary to agree to reduce deposit interest rates to end this situation.

The group of state-owned banks has large capital scale and the ceiling interest rate itself is already low, so the reduction will be around 0.2 percentage points; while the joint stock commercial banks have previously had high interest rates, so the upcoming reduction will be 0.5 percentage points. The interest rate reduction will be implemented soon in the near future.

When the deposit interest rate decreases, the lending interest rate will certainly decrease, possibly decreasing at a level corresponding to the percentage point of the deposit interest rate decrease. In fact, currently, banks are not disbursing much credit capital for loans, so it is hoped that when the lending interest rate decreases, it can promote an increase in credit capital for loans.

- Ms. NGUYEN THI HONG, Governor of the State Bank:

22 commercial banks have reduced lending interest rates.

The world economy is currently recovering slowly, initially avoiding the risk of recession, but still complicated developments. Since the beginning of the year, 36 more central banks in the world have increased interest rates. This has caused the USD to start increasing in value again since mid-February 2023. Currently, the USD-Index is at 104.49 points, up 7.29% over the same period in 2022.

The USD's movements are putting pressure on monetary and foreign exchange policy management because the State Bank of Vietnam (SBV) must strive to reduce interest rates while also making efforts to stabilize exchange rates. Since the beginning of the year, the foreign exchange market and domestic exchange rates have been stable, and transactions in the foreign exchange market have been smooth; VND has only depreciated by 0.6% compared to the end of 2022, which is a low depreciation compared to currencies in the region.

Therefore, recently, the State Bank has directed credit institutions to reduce interest rates, and in fact, interest rates in the market have begun to decrease. The average new lending interest rate has decreased by 0.43%. Currently, 22 commercial banks have reduced their average lending interest rates. In the coming time, the State Bank will continue to regulate in the direction of striving to reduce interest rates.

- Dr. NGUYEN DINH CUNG, Former Director of the Central Institute for Economic Management:

Need to share risks with businesses

If we look directly at the weaknesses of the economy in 2022, we can see some paradoxes. First, inflation is low but interest rates are still quite high. The real economy is good, the macro is stable, but the financial market is falling sharply, wavering and collapsing; credit is dry; investors are "fleeing"; the real estate market is "frozen"... In addition, businesses lack orders, millions of workers lose their jobs or have reduced jobs and income; businesses are facing difficulties, reducing production but budget revenue increases sharply, even exceeding the plan.

In the context of inflation in the US and Europe showing a downward trend, governments still prioritizing anti-inflation, monetary and fiscal policies are still tight, so Vietnam cannot quickly lower interest rates. However, the important thing here is that businesses' access to capital has not improved. Lending interest rates have not increased, but are at a high level (twice as high as in foreign countries) and have not decreased, or have decreased insignificantly, as reported by SGGP Newspaper.

I think it is difficult to blame domestic enterprises for selling their businesses to foreign partners. Some sell to protect their personal assets, others sell to implement their own business strategies. The important thing is that the State needs to encourage, accompany, sympathize and share risks with enterprises. We should not consider punishment, inspection and examination as the top task in State management; instead, we should pay attention and provide the most practical support possible, through improving the business environment. Otherwise, we will never have strong domestic enterprises that can compete equally with foreign enterprises.

- Mr. Nguyen Dinh Tung, General Director of Orient Commercial Bank (OCB):

Banks must reduce interest rates to increase credit growth.

In fact, credit growth in late 2022 and the first two months of 2023 is not easy, even when the State Bank has granted credit limits to banks. Currently, businesses are only producing at a moderate level and limiting business expansion, so the demand for loans is low. Even individual customers rarely borrow money to buy houses due to high interest rates and a sluggish real estate market. I believe that in the next few weeks, lending interest rates will "cool down" because in the market, interest rates are "cooling down", in which lending interest rates decrease faster than deposit interest rates.

Three weeks ago, OCB reduced lending rates in priority sectors and working capital loans for production and business to below 10%/year. Since the beginning of March 2023, OCB has also adjusted deposit interest rates down by 0.5% for many terms under 12 months. Under favorable conditions, OCB will continue to reduce deposit interest rates to quickly reduce lending rates to increase credit growth. In addition to reducing interest rates for production and business sectors, it is expected that in the next 1-2 weeks, OCB will have a home loan program with an interest rate of 10% - 10.5%/year. This is a low home loan rate compared to the market, but we hope to continue to reduce home loan interest rates to 8% - 9%/year in the second quarter of 2023 and try to reduce them to 7%/year as before.

- Mr. Tran Van Linh, Director of Thuan Phuoc Seafood and Trading Joint Stock Company:

Low interest loans for businesses to help overcome difficulties

High interest rates make it impossible for businesses to develop. Therefore, banks need to have priority capital for the manufacturing industry and reduce interest rates to support businesses. The State has introduced a policy of supporting 2% interest rates for loans in Vietnamese Dong, but exporting businesses cannot access it because they mainly transact in USD. Therefore, the State needs to have a policy of debt extension and lending to businesses at low interest rates to resolve internal difficulties as well as maintain production and business.

Source: https://www.sggp.org.vn/giam-lai-suat-can-bang-cac-loi-ich-post680820.html