State Bank of Vietnam cuts interest rates to boost growth

October 30, 2014 | 08:44

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The State Bank of Vietnam (SBV) has cut the interest rate on Vietnamese dong deposits with terms of less than six month by 0.5 percentage point to 5.5% in a move to encourage lending and boost economic growth.

The central bank's move aims to boost lending and economic growth.

The annual interest rate on foreign currency was also lowered from 1% to 0.75%, the central bank announced, adding that the rate cuts are effective from October 29.

The SBV also asked commercial banks to reduce the lending rates for some key sectors to 7% on short-term loans and 10% on loans with longer terms as a measure to support businesses.

Deputy Head of the central bank’s Monetary Policy Department Nguyen Thu Ha said as of October 24, total loans rose by 7.85% compared with the end of 2013, with the figure expected to reach around 12% by the end of this year.

Vietnam’s annual inflation in October eased to 3.23% and economic growth quickened to 6.19% in the July-September quarter, up from the 5.42% recorded in the previous three months, according to official data released by the General Statistics Office.

The growth rate is still below potential when compared with average growth of 7% during 2006-2011.

Earlier this month the World Bank predicted that the Vietnamese economy would expand by 5.4% in 2014, the same pace as in 2013, before edging up slightly to 5.5% the following year.

The central bank said since the last rate cuts in March, the average interest rates on both deposits and loans have gone down by 1-1.5 percentage points against the end of 2013.

As of October 9, Vietnamese dong-denominated loans with rates of over 15% accounted for 4.12% of total loans, down from 6.3% seen at the end of 2013 while the percentage of loans with rates between 13% and 15% also dropped from 19.72% to 11.7%.

Nhan Dan

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