Vietnam to fuel economic growth with more interest rate cuts

HCMC – Prime Minister Pham Minh Chinh has issued a directive aimed at fostering economic growth by further reducing interest rates and revising up the credit growth limit.

The directive, issued on August 1, addresses challenges facing the real estate market and support economic growth. It comes after a conference reviewing the performance of the banking system in the first half of the year and the State Bank of Vietnam’s (SBV) tasks for the second half.

It includes measures to boost economic growth through making available various credit packages. These include accelerating the disbursement of a VND40 trillion credit support program with reduced interest rates, a VND120 trillion package for social housing loans, and a VND15 trillion package for the forestry and fishery sectors.

To ensure a balanced approach to monetary policy, the Government will continue to take active and flexible measures, adjust down interest rates and increase the credit growth limit in response to market changes. The SBV has been assigned to closely manage M2 money supply and focus on credit for key growth areas, such as investment, consumption and export.

Monetary policy will be coordinated with fiscal policy, ensuring a reasonable and focused expansion to achieve quick results. The Government aims to maintain a balanced approach between interest rates and exchange rates, as well as between inflation and growth, to stabilize the macroeconomy, control inflation, and address production and business constraints.

In order to strengthen the financial system, the Government will review and improve legal and policy frameworks. The law on credit institutions will be amended and supplemented based upon realities and feedback from stakeholders.

The SBV has been tasked with guiding commercial banks to cut costs, streamline administrative procedures, and leverage technology for interest rate reductions and easier access to credit. These measures are intended to boost business recovery and expansion, while ensuring a fair distribution of benefits.

The central bank will team up with the Ministry of Finance to work towards developing a healthy and sustainable securities market, with an emphasis placed on improving legal frameworks and implementing risk control mechanisms.

The directive also highlights the need for collaboration between the SBV and the Ministry of Construction to cope with difficulties in the real estate market. The Government will also focus on providing practical solutions to stimulate economic growth, while adhering to relevant regulations.

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