Australia and New Zealand Banking Group (ANZ) said in its latest report about Vietnam’s economy that its central bank could cut the benchmark interest rate by 50 percentage points to 6.5 per cent per year by mid-2009.
The possible 6.5 per cent base rate will be kept unchanged until September next year when it is expected to be raised to 7 per cent per annum, ANZ mentioned in the report which was released on May 13.
Vietnam has devalued its currency twice since December 25 as a result of some reasons of fever on the domestic grey market, including psychological factor and hoarding greenbacks by firms.
ANZ believed that Vietnamese government will keep the local currency weak to encourage exports and keep U.S. dollar demand/supply balanced at domestic market despite refusal made by the SBV on U.S. dollar shortage.
The VND/USD exchange rate may increase to VND18,800/US$1 from current VND17,784-17,787 late this year, according to ANZ.
While ANZ thinks that SBV will slash the base interest rate, domestic economists said that the central bank will either raise the rate or keep it stable.
Prof Dr Tran Ngoc Tho, dean of Corporate Finance Faculty under the HCM City Economic University, said that the base interest rate might be raised again as high inflation could return when Vietnam is pumping more money into the economy. Moreover, bank interest rates need to increase to ensure that banks can mobilize idle capital from the public.
Nguyen Duc Tai, director of the HCM City Transaction Center of DongA Bank, believes that the basic interest rate will be kept stable in the coming months, even though deposit interest rates tend to increase.
Vietnam's economy is forecast to regain its growth momentum to expand 3.5 per cent-3.8 per cent in the second quarter, higher than 3.1 per cent in Q1, and grow 4.5 per cent-5 per cent this year. (CafeF)
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