Fine-tuning growth engine

It has set the train in motion to lower lending interest rates and increase public investment project disbursement to capitalise on the first six months’ strong economic performance.

Government Office Chairman and Minister Nguyen Xuan Phuc said Prime Minister Nguyen Tan Dung had asked the State Bank to continuously lower lending interest rates to accelerate economic growth.
“We are having a good growth momentum and low lending interest rates will ensure that we can maintain this momentum this year,” said Phuc.

The General Statistics Office (GSO) last week reported that the economy accelerated 6.4 per cent year-on-year in the second quarter, or 6.16 per cent in the first half of this year. The Ministry of Planning and Investment (MPI) estimated that the economy could expand 6.5-6.8 per cent for the whole year.

In a recently released report, Standard Chartered Bank estimated that Vietnam’s economy will accelerate by 6.7 per cent this year. The bank’s estimate is based on expanding industrial production, domestic retail sales, increasing export sand lower lending interest rates.

Phuc said the government wanted to lower average interest rates to 12 per cent, per year. Lending interest rates increased to an average 14 per cent during the first four months of this year. However, the business community still claims it cannot easily access commercial banks loans.

According to the Sate Bank, current average lending interest rates are at around 13.4 per cent and the average mobilisation interest rate is 11 per cent, down 1 and 0.7 per cent respectively from early this year.
Nguyen Ngoc Bao, director of the State Bank’s Monetary Policy Department, said the central bank would apply all essential measures to lower lending interest rates in the third quarter.

“Low inflation rate in the first half of the year, good banking system liquidity and the consensus of local banks will allow us to step-by-step lower lending interest rates,” said Bao.

The consumer price index in June increased 0.22 per cent against May, or 4.8 per cent over last December. Given it, the MPI estimates that inflation this year will not be higher than 8 per cent as targeted.

The current high lending interest rate has hampered the credit growth in over the past six months. The central bank reported that credit growth in the first half this year increase only 10.5 per cent against last December.

Bao said lowered interest rates would also allow local banks to increase credit growth up to 25 per cent at the end of this year. Besides lowering lending interest rates, the government has also asked local authorities and state-owned companies to improve disbursement at public investment projects.

According to an MPI’s report, about $8.2 billion in state funds were disbursed in the first half this year, increasing 17.8 per cent compared to the corresponding period last year. However, the report said the amount remained lower than expected.

“The prime minister has required improving disbursement at public investment projects. This is an important measure to create consumption and push economic growth,” said Phuc.