Interest rates to fall

16:24 | 10/04/2016 Economy

(VEN) - Credit growth has witnessed slight expansion since the beginning of the year. The State Bank of Vietnam (SBV) said that thanks to the implementation of numerous solutions, medium and long-term interest rates could fall this year.

Interest rates to fall

A slight reduction in medium and long-term interest rates this year is possible

According to the SBV’s Monetary Forecasting and Statistics Department, by February 19, credit growth increased by 0.33 percent compared to the end of 2015. Outstanding loans serving agricultural and rural development implemented by credit institutions excluding the Vietnam Bank for Social Policies and the Vietnam Development Bank increased by 1.22 percent by January 2016 and around 1.32 percent by February 2016 compared to the end of 2015. In addition, outstanding loans for high-tech businesses, small and medium-sized enterprises and key industrial sectors increased by 42.2 percent, 12.12 percent and 10.76 percent, while falling by 1.15 percent in exports.

Short-term interest rates stood at around six to nine percent a year by February 2016, while its medium and long terms reached 9-11 percent a year. A slight reduction in interest rates has contributed to promoting trade and production activities.

The SBV’s Monetary Policy Department Director Bui Quoc Dung said that in a context where international financial markets continue to face difficulties, pressure on interest rates remains huge as capital raising by government bonds and medium, long-term credit growth have tended to increase.

Inflation is forecasted to be higher than the previous years, creating pressure on interest rates. In addition, the growth target is set at 6.7 percent, higher than last year’s growth with 6.68 percent, leading to an increase in credit demand. In the context of facing difficulties, Dung said that the SBV would flexibly operate monetary policies and other tools, and adjust interbank interest rates in an appropriate manner, creating favorable conditions to stabilize interest rates and exchange rates, and control inflation.

“The SBV will continue to provide new solutions and management tools in accordance with macroeconomic developments and monetary market conditions. With the implementation of such solutions, maintaining stability and slightly reducing medium and long-term interest rates this year are possible,” Dung said.

The SBV’s Monetary Policy Department Director Bui Quoc Dung said that interest rates for government bonds with a five-year term strongly increased from 5.4 percent a year to nearly seven percent a year in 2015. Demand on capital raising from government bonds this year is expected to be higher than 2015, creating big pressure on medium and long-term interest rates.


Duy Minh