The State Bank of Vietnam (SBV) reported that although world economies continued to grow in the first months of this year, the recovery progress still confronted numerous difficulties and challenges. Global trade jumped high partly because prices of merchandises leaped. Import expenditure in some economies increased faster than export turnover. Besides, the US dollar tended to ease in the first four months but rallied against most hard currencies in the world in May 2011.
The Vietnamese economy continued to face difficulties and challenges: High inflation, widening trade deficit, falling stock market, freezing real estate market, shrinking foreign direct investment, and rising interest rate (caused by inflation).
After the Government issued the Resolution 11/NQ-CP dated February 24, 2011 on major solutions to curb inflation, stabilise macro economy and ensure social security, the SBV took synergetic and decisive measures to pursue a tight and prudent monetary policy in order to strictly control growth rate of total liquidity and credit outstanding, and credit restructure and the liquidity of the banking sector.
The SBV required credit institutions to develop and implement the 2011 operational plan in line with the targeted credit growth of below 20 percent; to prioritize credit extension for business and production, agricultural and rural development, exporters and supporting industries, and small and medium enterprises; to reduce the pace and amount of loans for the non-productive sector to account for 22 percent of the total loan outstanding by June 30 and 16 percent by December 31, 2011. The SBV will strictly deal with those credit institutions still adhering to the credit growth rate of over 20 percent in 2011.
In addition, the SBV gradually increased benchmark rates. Particularly, refinancing rates and overnight rates were gradually lifted from 11 percent to 14 percent per annum; rediscount rate from 7 percent to 13 percent, and OMO (open market operations) rate from 11 percent to 15 percent. It also gradually increased the reserve requirement ratio of foreign exchange deposits at credit institutions (up by 2 percentage points from May 1, and 1 percentage point from June 1, 2011).
According to the report of the SBV, as of June 10, 2011, the total liquidity rose by 2.33 percent as compared to the end of 2010. The total deposit outstanding increased by 2.37 percent, of which the deposits in the Vietnamese dong were up by 1.15 percent and foreign currencies by 8.89 percent.
Credit to the economy increased by 7.05 percent, of which credit amount in VND and foreign currencies were up by 2.72 percent and 22.21 percent respectively. Credit amount rose by 6.17 percent for short terms and 7.66 percent for medium and long terms.
Credit outstanding for the productive sector climbed 10.97 percent, accounting for 83 percent of the total loan outstanding, of which credit amount rose by 24.96 percent for agricultural and rural development and 25.77 percent for exporters. Credit outstanding for the non-productive sector slumped 9.46 percent, accounting for 16.92 percent of the total loan outstanding.
The actual average VND lending rate increased by 3.4 percentage points per annum as compared to end-2010 to 18.74 percent per annum, of which the lending rates for rural and agricultural production, and exporters were 17-19 percent per annum; and the rates for other business and production sectors were 19.2 percent per annum; and the rates for the non-productive sector were 22-25 percent per annum. The common USD interest rates were relatively stable. The USD mobilizing rate was close to the fixed ceiling rate. The average USD lending rate was 6.4 percent per annum, equivalent to that of end 2010.
The lending rates in the interbank market from mid-May were on a downward trend, the current overnight lending rate was 13 percent per annum, the rates for 1 week, and 2 weeks - 1 month were 15 percent per annum and 18 percent per annum respectively.
The central bank said the foreign exchange market showed more positive signs. The foreign exchange positions of commercial banks were improved, the psychology of the market was stable, and the parallel forex market was strictly monitored. The amount of foreign currency purchase by commercial banks was much larger than their sale. Thereby, the average interbank VND/USD exchange rate was on a downward trend. At certain times, commercial banks quoted their exchange rates lower than the average interbank exchange rate.
Quynh Chi
Vietnamese
