Vietnam May Cut Benchmark Interest Rates to 7 per cent in 6 Months to Come

Vietnam will probably slash benchmark interest rate to 7 per cent by mid-2009 to maintain growth amid worsening global economy, Deutsche Bank AG predicted late last week, the state-run Thanh Nien Daily said.

 

“We expect the State Bank of Vietnam to deliver at least another 400 basis points in rate cuts over the six months as external conditions deteriorate further and inflation continue to ease,” Michael Spencer, Deutsche Bank’s Hong Kong-based chief Asian economist wrote in a note dated Nov 25.

 

Consumer prices slowed to a year on year rate of 24.2 per cent in Nov from 26.7 per cent in Oct, a steeper deceleration than expected, Deutsche Bank said.

 

Lower interest rates in Vietnam may help revive lending for struggling industries such as construction with steel companies warned of sharp declining sales.

 

With exports growth and foreign investments set to slow, strong domestic demand is needed to fuel economic growth target of 6.5 per cent next year.

 

Meanwhile, inflation in Vietnam is slowing at an incredible speed, Bill Stoops of Dragon Capital in Ho Chi Minh City said in a note sent to its clients, forecasting that inflation will fall to single-digits by mid-2009.

 

The State Bank of Vietnam, the country’s central bank, has cut the benchmark interest rates to 11 per cent. (Thanh Nien Daily)