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Tuesday, June 25, 2024

UOB: Vietnam will keep interest rates steady in 2024

The Saigon Times

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HCMC – United Overseas Bank (UOB) experts have forecast that Vietnam’s central bank will keep interest rates steady throughout this year so as to boost credit growth to support economic growth and green initiatives.

Instead of adjusting interest rates, the State Bank of Vietnam (SBV) aims to increase credit growth by 5% to 6% by the end of the second quarter of 2024. This strategy includes simplifying lending procedures and integrating digital technology, UOB said in its report released on June 10.

The decision to maintain interest rates comes amidst concerns about the Vietnamese dong’s vulnerability to the U.S. dollar, which has been trading near a record low of nearly VND25,500 per U.S. dollar in the second quarter of this year.

Despite domestic economic improvements, UOB analysts note that the Vietnamese dong remains influenced by the strength of the U.S. dollar. However, they anticipate a potential recovery in the second half of the year due to reduced external pressures following expected interest rate cuts by the U.S. Federal Reserve in September.

The Vietnamese dong could benefit from the anticipated recovery of the Chinese yuan in the second half of the year, as China’s economy shows clearer signs of stability.

The SBV has intervened in the foreign exchange market to cope with exchange rate volatility, but UOB experts suggest that the Vietnamese dong could regain strength in the second half. UOB forecast the dong-dollar exchange rate at VND25,200 per dollar in the third quarter and VND25,000 per dollar in the fourth quarter.

The central bank’s decision to keep interest rates steady comes amidst improving economic activities and lower inflation than targeted.

UOB experts anticipated that the central bank will keep its current refinancing rate at 4.5% in the rest of 2024, balancing economic recovery and moderate inflationary pressures.

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