The State Bank of Vietnam (SBV) has announced that it will not entertain the idea of raising policy interest rates and is considering extending debt rescheduling policies to support enterprises in the current year. Speaking at a press conference on January 3, SBV Deputy Governor Dao Minh Tu emphasised that interest rates have reached the lowest levels in the past two decades. While commercial banks argue that rates cannot go any lower, the central bank is encouraging efforts to reduce costs to provide leeway for supporting the economy.
The central bank’s approach will involve managing rates without increasing operating costs, taking into account global economic developments and major macro balances. Last year, the SBV implemented four cuts to policy interest rates ranging from 0.5% to 2%, resulting in a reduction of approximately 2 percentage points in deposit and lending rates compared to the end of 2022.
By the end of 2023, lending rates for prioritised sectors had dropped to below 4% per year, and the average deposit rate was 3.5% per year. The average lending rate for new loans stood at 6.7%. Despite the credit growth rate being 13.5% in 2023, slightly below the target of 14-15%, the monetary market remained stable, and inflation was under control.
Highlighting the challenges faced by the economy in the ongoing year, SBV Deputy Governor Tu noted that the central bank is contemplating extending Circular 02 on debt rescheduling and retention of debt categories to support businesses in 2024. Additionally, the central bank has set a credit growth target of 15% for the domestic banking system this year, estimating that such growth would inject around 2 quadrillion VND (approximately $81.8 billion USD) into the economy in 2024.