The State Bank of Vietnam (SBV) announced on May 25 that it would cut interest rates in a bid to revive the country’s struggling economy.
This is the third cut by the SBV in three consecutive months this year.
The refinancing rate will fall to 12 percent from 13 percent, the discount rate will be cut to 10 percent from 11 percent, the deposit rate cap to 11 percent from 12 percent, and inter-bank loan rate to 13 percent from 14 percent. New rates will be effective from May 28.
Also included was a 1% reduction in deposit interest rates at the People’s Credit Fund, from 12.5% to 11.5% per year with terms from one month.
The SBV will also help resolve difficulties for small and medium enterprises, agricultural production, and some other industries by lowering loan interest rate to 14 percent from the current 15 percent.
According to the central bank, the country has successfully curbed inflation since last August by adapting proper policies. The CPI for the first five months has increased by only 2.78 percent from the same period last year, which meets the Government’s target of below 10 percent for 2012.
However, SBV also pointed out many challenges faced by the economy including rising stock level and stagnant production.
In response to the SBV’s decision, international financial experts and organisations all said it was a necessary move to help local enterprises overcome this difficult time.
“We expect inflation to be moderate for the remainder this year, and with the economy likely to remain weak, further rate cuts are likely,” Gareth Leather, a London-based economist at Capital Economics Ltd., told the Bloomberg.
