Vietnam: SBV cuts interest rates to boost the economy
March 18, 2014
On 17 March, the State Bank of Vietnam (SBV) decided to reduce its key refinancing rate on dong loans for the ninth consecutive meeting, cutting it by 0.50 percentage points from 7.0% to 6.5%. In addition, the Bank reduced the short-term lending rate from 9.0% to 8.0% in order to, “meet the capital needs of agricultural and rural developments, exports, the supporting industries, small and medium enterprises, and high-tech enterprises.” The SBV continues to ease its stance in an effort to support growth amid slowing domestic demand and falling foreign direct investment. The Bank acknowledged that inflation has been under control recently. In February, CPI rose 0.55% on a monthly basis and 4.7% over the same month last year. Lower interest rates could help the country meet the government's 5.8% growth target. FocusEconomics Consensus Forecast panelists expect a refinancing rate of 7.00% in 2014. Panelists see the Bank increasing rates next year to 7.17%.
Author: Dirina Mançellari, Senior Economist