Vietnam to cut refinance rate to 6.5% to aid GDP

Bloomberg

Tue, Mar 18, 2014 - Page 15

Vietnam is to cut its refinance rate and other policy rates, as the government tries to support businesses and bolster a struggling economy.

The refinancing rate is to be lowered to 6.5 percent from 7 percent today, State Bank of Vietnam chief administrator Le Duc Tho said by telephone in Hanoi, adding that the bank would make an announcement on “some other” policy rate cuts later today.

Vietnamese policymakers are trying to bolster an economy that the World Bank estimates would rise 5.4 percent this year, slower than a government target of 5.8 percent.

Vietnamese Prime Minister Nguyen Tan Dung last month asked the central bank to step up measures to lower lending rates, a government statement said, as the highest level of bad debt among Southeast Asia’s biggest economies curbed lending and hurt Vietnamese businesses.

“It is to promote economic growth,” said Alan Pham, Ho Chi Minh City-based chief economist at VinaCapital Group, the nation’s largest fund manager. “It will enable banks to lower lending rates to stimulate more borrowing for investment. That will help stimulate more economic activity.”

Vietnam’s inflation last month eased to 4.65 percent from a year earlier, the slowest pace since November 2009. Exports rose 12.3 percent in the first two months of the year from a year ago.

The interest-rate cap for dong deposits with maturities of less than six months was cut to 6 percent from 7 percent yesterday, State Bank monetary policy head Nguyen Thi Hong said by telephone.

The central bank last cut the refinancing rate in May last year and the repurchase rate in July after devaluing the currency to help boost exports.