Monetary policy governance requires thorough consideration: official

The economy records over 12.7 quadrillion VND (517.5 billion USD) in credit as of the end of September, up 6.92 per cent from the end of 2022. (Photo: VNA)

Hanoi – As the governance of the monetary policy has to concurrently guarantee multiple targets, including reducing interest rates, expanding credit, stabilising foreign exchange rates, and ensuring credit institutions’ safety, thorough consideration is needed before any steps are taken, Deputy Governor of the State Bank of Vietnam (SBV) Dao Minh Tu.

Given this, the central bank will continue the work in a way that guarantees macro-economic stability. Interest rates will be kept stable, and rate cuts could be considered when conditions are in place to ensure inflation control, capital supply, and liquidity for credit institutions and the economy, he said.

It will also push ahead with perfecting legal documents, mechanisms, and policies on credit and stay ready to take measures to tackle difficulties and meet credit demand, Tu noted.

As of the end of September, the economy recorded over 12.7 quadrillion VND (517.5 billion USD) in credit, up 6.92 per cent from the end of 2022. The credit growth has accelerated in recent months, according to the SBV.

There remains much room for credit to grow further, it opined.

The SBV’s recent survey of credit institutions for the fourth quarter showed that outstanding loans of the entire banking system is expected to increase 4.6 per cent in Q4 and 12.3 per cent in the whole of this year, down 0.2 percentage point from the earlier prediction of 12.5%.

If credit expansion stands at 4.6 per cent in Q4 as forecast, credit growth in the economy will reach just 11.52 per cent, the SBV went on.

In its newly released macro report, the Vietcombank Securities Company (VBCS) said pressure on foreign exchange rates will remain at least until November. However, in favourable conditions, the Vietnamese currency, the dong, may depreciate at a reasonable pace of about 3 per cent compared to the US dollar.

The forecast was based on the projection that in comparison with the monetary policies of global central banks after the September updates, the US dollar will maintain its high value until at least November.

Deputy Governor Tu expressed his hope that credit growth will gain speed during the last three months as usual.

The SBV will take strong measures, together with localities’ moves to address obstacles, to help businesses surmount difficulties, he added.

Variables still at play in global monetary policy Le Xuan Nghia, director of the Business Development Institute and member of the National Financial and Monetary Policy Advisory Council, scrutinises the development prospects in Vietnam and around the world for the remainder of 2023 and beyond.

More harmonisation advised for fiscal and monetary policy While the additional loosening of monetary policy is constrained, Vietnam should focus on boosting the expansion of fiscal policy to spur domestic production and business activities, economists have said.

Predictable policy measures can ensure a smoother ride The government is flexibly managing monetary policy for the economy. Nguyen Ba Hung, principal country economist at the Asian Development Bank in Vietnam, talked with VIR’s Hong Dung about how this policy can perform in addition to a need for a stronger fiscal policy to boost economic activities.