Monetary Policy in 2012: Concentration on Production

In a press meeting on November 21^st, the Governor of State Bank of Vietnam (SBV) presented some information on important monetary policy for the next year.

In 2012, the National Assembly has projected some economic development indicators, according to which systematic credit growth is expected to reach from 15 percent to 17 percent. SBV will steer monetary policy toward this target to stabilize the macro-economy, restrain inflation as well as ensure economic growth at the level of 6 - 6.5 percent. Credit growth is currently low, reaching for 10 percent since the beginning of this year. According to the Governor, SBV wants to make use of remaining time of this year to achieve the targeted credit growth of about 12-13 percent in 2011, and if credit-natured investments are taken into account, this figure will reach up to 15 percent in this year, creating strong impetus for the next year.

 

Fields given priority to access credit in 2012 include rural and agricultural development, especially recovering production in regions suffering from natural disasters, storms and floods; concentrating on exported products; and auxiliary supporting industries, small and medium-sized enterprises (SMEs). Agriculture and farmers have highest priority in credit access. SBV will commission Vietnam Bank for Agriculture and Rural Development (Agribank) to lend this object about 70-80 percent of its credit portfolio. SBV also encouraged other banks to spend about 20 percent of credit to agricultural objects. Units who cannot disburse can transfer their funds to Agribank.

Interest rates are expected to decrease in next year, however there is not any precise number. The Governor expected that, in the last two month of this year, the consumer price index (CPI) would rise less than 1 percent a month, making a base to lower interest rates, supporting production and businesses in 2012.

 

An issue which is paid special attention by the public is non-production credit. According to the Governor, there is likely a real estate market bubble. In 2011, the Government basically took the step to “blow up” bubbles and will continue in 2012. However, the real estate market plays a vital role in the economy and reckless actions will bring negative consequences. Currently, SBV is diligently studying policies suitable for the real estate market, preventing bubbles from swelling, at the same time waking the huge potential of the real estate market to contribute to the economy. According to the Governor, in 2011 the government has prevented a fever of inflation, therefore in 2012 credit policy will be considered at a more sensible level and condition: “As for consumer credit rate and non-production lending, SBV will consider to put them at a sensible level which is suitable for economic plan and economic targets of 2012.”