Deposit interest rates may fall to 9 per cent by year-end

Deposit interest rates may fall to 9 percent by year-end

Binh was quoted by Saigon Giai Phong (Liberated Saigon) newspaper as saying the central bank had previously slashed deposit interest rates according to the level of inflation in the country.

This year, it is expected that inflation will be brought down to below 10 per cent. If it reaches 8 or 8.5 per cent, the deposit interest rate will be brought down to 9 or 10 per cent, he said.

Early this year, the central bank had set a target of trying to cut the deposit interest rate by one point per quarter if the country's marco-economic environment is favourable, the governor said.

"However, we are likely to have conditions to cut the deposit interest rate more quickly than predicted thanks to recent marco-economic developments, particularly with regard to inflation," Binh said.

He also said that the deposit interest rate should not be slashed under 9 or 10 per cent because this level is reasonable since it will still ensure the position of Vietnam dong (VND) and therefore ensure the stability of the foreign exchange market.

With the deposit interest rate of 9 or 10 per cent per annum, depositing VND at banks will continue to be an attractive investment channel if compared with other options like gold, foreign currencies and real estate, Binh said.

He said a 1.71 per cent decrease in credit growth in the first four months was easy to understand in the context of curbing inflation.

In previous years, credit growth had stood at very high levels, with an average increase of 34 percent over the last 5 years, and 29 per cent over the last 10 years. However, this year's credit growth will be controlled at between 14 and 17 per cent to continue reigning in inflation and stabilising the marco economy.

Binh said that the central bank will closely watch the marco economy and initiate measures to help enterprises access bank loans at reasonable interest rates in order to help them maintain and develop their trading and production activities.