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Sunday, June 16, 2024

Vietnam to keep monetary policy steady this year – UOB

By Dat Thanh

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HCMC – The State Bank of Vietnam (SBV) will keep key interest rates steady throughout this year, according to a recent report by the United Overseas Bank (UOB).

As the economy was slowing down last year, the SBV made back-to-back interest rate cuts, with the last round of rate reductions occurring in June 2023. This brought the refinancing rate down by a combined 150 basis points to 4.5%.

With economic activity showing signs of improvement, further rate cuts are unlikely, and analysts expect the SBV to keep interest rates stable this year, UOB noted in the “Quarterly Global Outlook 2Q24.”

Rather than further lowering interest rates, the Government has shifted its focus to non-interest-rate measures to bolster the economy. One such measure involves directing credit to borrowers through quantitative means.

Bank loans rose around 13.5% year-on-year in 2023, slightly below the targeted range of 14-15%. This year, the SBV wants loan growth at about 15%, with flexibility to adjust based on economic developments.

Despite the Vietnamese dong currency weakening against the U.S. dollar in late February, trading at VND24,700 per dollar, expectations of stronger GDP growth in Vietnam this year, coupled with recovery momentum in the external trade and manufacturing sectors, are projected to help stabilize the local currency.

A projected recovery in the Chinese yuan, which the Vietnamese dong tracks, coupled with anticipated weakness in the greenbacke, may contribute to a recovery of the dong.

Analysts forecast the dong-dollar exchange rate to reach VND24,400 per dollar in Q2 2024, improve to VND24,200 per dollar in Q3 2024, strengthen further to VND24,000 by Q4 2024, and continue to VND23,800 by Q1 2025.

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