From May 25, operating interest rates will decrease by another 0.5%.

According to economic experts, the measure to lower operating interest rates aims to help banks reduce deposit interest rates, thereby creating conditions to lower lending interest rates, support the economy, and promote rapid growth.

Specifically: The State Bank of Vietnam announced two decisions on interest rate management effective from May 25. These are Decision No. 950/QD-NHNN dated May 23 on refinancing interest rates, rediscount interest rates, overnight lending rates in interbank electronic payments and lending to cover capital shortages in clearing payments of the State Bank of Vietnam for credit institutions.

Accordingly, the overnight lending interest rate in interbank electronic payments and lending to cover capital shortages in clearing payments of the State Bank of Vietnam to credit institutions will decrease from 6.0%/year to 5.5%/year; the refinancing interest rate will decrease from 5.5%/year to 5.0%/year; the rediscount interest rate will remain at 3.5%/year.

Next is Decision No. 951/QD-NHNN dated May 23 on maximum interest rates for deposits in Vietnamese Dong (VND) of organizations and individuals at credit institutions according to regulations in Circular No. 07/2014/TT-NHNN dated March 17, 2014.

Accordingly, the maximum interest rate applied to non-term deposits and deposits with terms of less than 1 month remains at 0.5%/year; the maximum interest rate applied to deposits with terms from 1 month to less than 6 months decreases from 5.5%/year to 5.0%/year, while the maximum interest rate for deposits in VND at People's Credit Funds and Microfinance Institutions decreases from 6.0%/year to 5.5%/year; the interest rate for deposits with terms of 6 months or more is determined by credit institutions based on the supply and demand of capital in the market.

According to the SBV, the reduction in operating interest rates aims to promote economic growth, support liquidity in the interbank market and facilitate lending and borrowing activities in the banking system. These measures are expected to encourage investment and consumption, contributing to the overall stability and development of the Vietnamese economy. The SBV will continue to closely monitor the market situation and apply appropriate monetary policies to maintain overall economic stability and ensure the effective operation of the financial system.

Previously, the State Bank of Vietnam reduced operating interest rates twice on March 15 and April 3.

Recently, many businesses have complained about cash flow difficulties and difficulty accessing loans with high interest rates. In a meeting at the end of April 2023, the Prime Minister requested state-owned commercial banks to make maximum use of measures to reduce costs and lower interest rates to increase access to capital for people and businesses.

According to Dr. Can Van Luc, Chief Economist of the Bank for Investment and Development of Vietnam ( BIDV ), Member of the National Financial and Monetary Policy Advisory Council, this year's monetary policy must be more multi-targeted because it must shoulder the additional task of stabilizing the financial and monetary system in the context of a very unstable global economy.

“The State Bank of Vietnam has shifted its policy stance from tight and cautious to cautiously loosening to support growth. It is necessary to continue reducing interest rates, increasing access to capital for businesses; continuing to implement debt restructuring policies, supporting liquidity, and promoting the restructuring of credit institutions,” said Mr. Can Van Luc.

In addition, fiscal policy still has a lot of room as public debt and government debt are quite far from the allowable ceiling, so fiscal policy must continue to be the main policy supporting economic growth. Accordingly, it is necessary to implement a reasonable, focused, flexible and effective expansionary fiscal policy. The Government has issued Decree No. 12/2023/ND-CP on extending the payment of value added tax (VAT), corporate income tax, personal income tax and land rent in 2023; requesting to speed up VAT refunds; directing the Ministry of Finance to urgently submit to competent authorities a plan to reduce VAT by 2% and additional support plans on tax exemptions, fees, charges, etc. to support people and businesses.

Coordinating to accelerate public investment disbursement and the Socio-Economic Recovery and Development Program to reduce cash flow congestion, increase liquidity for the system, and unlock all resources for development is also a priority solution.

Dr. Can Van Luc forecasts: Regarding credit, the possibility of credit growth for the whole year is about 13%, lower than the credit growth target of 14 - 15% of the State Bank. Capital mobilization and money supply growth rate are also forecasted to be more positive than last year with a growth rate of about 10% (in 2022, it will increase by 8%), better meeting the capital needs of the economy and businesses. The stock market is also forecast to recover, increasing by about 15%.

Source