Vietnam’s Central Bank Affirms No Interest Rate Hike in 2024

• 14 February 2024
• International News
• 1707 Views

In a pivotal announcement, the State Bank of Vietnam (SBV) declared its stance on interest rates for the year 2024, affirming a commitment to maintain current policy rates. SBV Deputy Governor Dao Minh Tu addressed the Vietnam Plus during a press conference on 3 January, outlining the central bank’s strategic approach to economic support.

Deputy Governor Dao Minh Tu emphasized that there would be no contemplation of increasing policy interest rates, and there exists a possibility of extending debt rescheduling policies to bolster enterprises. Despite interest rates hitting a two-decade low, commercial banks assert that further reductions may be unfeasible. However, the central bank urges a collective effort to curtail costs, thereby creating space to fortify the economy.

Last year, the SBV implemented four cuts to policy interest rates, ranging from 0.5% to 2%, resulting in a noteworthy 2-percentage-point decrease in deposit and lending rates compared to the close of 2022. As of the conclusion of 2023, lending rates for prioritized sectors dipped below 4% annually, while the average deposit rate settled at 3.5% per year. The average lending rate for new loans stood at 6.7%.

The lending interest rates in Cambodia, particularly for term loans, have experienced fluctuations over recent months. As of October 2023, rates for term loans in both USD and other currencies have seen variations, with term loan rates slightly above 10% in July 2023 and then sharply rising to around 15% by October 2023. Other loans, on the other hand, have witnessed changes from slightly above 7% in July 2023 and slightly above 7.5% by October 2023, according to CBRE’s update on 12 January 2024. Thus, it seems that Cambodia’s lending rates, particularly the sharp rise to around 15% for term loans and 7.5% for other loans, appear to be higher compared to Vietnam’s average lending rate for new loans at 6.7%.

Despite the challenges faced by the economy, characterized by a credit growth rate of 13.5% in 2023—slightly below the targeted range of 14-15%—SBV’s Tu highlighted the achievement of maintaining a stable monetary market and controlling inflation.

Anticipating ongoing economic challenges in the coming year, the central bank contemplates extending Circular 02 to facilitate debt rescheduling and retention, providing vital assistance to businesses in 2024. Additionally, the SBV has set a credit growth target of 15% for the domestic banking system, injecting approximately 2 quadrillion VND (US$81.8 billion) into the economy.

• Analysis
• Economy and Finance