Maybank researchers including Brian Lee Shun Rong and Chua Hak Bin forecast that the State Bank will continue to reduce another 50 basis points for the next time.
The State Bank of Vietnam (SBV) has cut interest rates for the third time in line with Maybank’s forecast from the beginning of May. Specifically, on May 8, in the market strategy report for May 2023, the ministry The research and analysis department of Maybank Investment Bank Vietnam stated that this May, the SBV will lower the operating interest rate by 50 basis points. Accordingly, the operating interest rates are expected to be reduced by 50 basis points by this investment bank, including the refinancing rate and the 6-month deposit rate ceiling.
The third time the State Bank cut interest rates to support businesses and people in the context of the economic downturn was on May 25. Accordingly, the refinancing interest rate will be reduced from 5.5% to 5%. The ceiling interest rate for deposits with a term of 1 to 6 months was reduced from 5.5% to 5%, while the maximum interest rate for deposits with a term of less than 1 month remained at 0.5%.
According to Maybank, the duration and extent of policy easing by the State Bank of Vietnam are in line with Maybank’s forecast of growth and CPI in the second quarter mentioned in previous articles.
The lending rate ceiling applied to loans for priority sectors (i.e. agriculture, export-related industries, small and medium enterprises, high technology) is maintained at 4.5 %/year after being cut by 100 basis points in Q2 (from April 1, 2023). The rate cut comes in time against headwinds on inflation and currency growth.
Summary of SBV’s interest rate reduction policies in 2023. Source: SBV
The SBV said the new interest rate cut “aims to lower interest rates to help businesses and households better access credit”. As of April 27, credit growth was 3.04% compared to the end of 2021, less than half of the 7.24% increase in April last year. The policy easing will help reduce the cost of capital for banks and promote a further reduction in lending rates. At the same time, the State Bank is continuing to direct banks to reduce lending rates in the coming months.
Roadmap for Decision on refinancing and discount rates of the State Bank (2010 – 2023). Source: SBV
The interest rate cut comes in a timely manner as economic growth slows, while inflationary and monetary pressures increase. The SBV also mentioned that stable banking system liquidity helped facilitate policy easing. The economy was hit mainly by falling demand in external markets and refinancing stress in the real estate sector. Maybank researchers including Brian Lee Shun Rong and Chua Hak Bin forecast that the SBV will continue to reduce another 50 basis points for the next time.
Also according to this organization’s forecast, Vietnam’s inflation in 2023 will increase by 3.4%, much lower than the target of 4.5%.
