Central bank's flexible monetary policy brings in positive results

Wednesday, 2014-12-31 14:25:00
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The credit growth target for 2015 is set at 13%-15%
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NDO - The State Bank of Vietnam (SBV) has seen positive outcomes while implementing monetary policy in a flexible and synchronous manner in 2014, in line with the targets set by the National Assembly and Government, making significant contributions to national economic achievements.

The SBV has carried out an active interest rate policy in an effort to reduce interest rates and ease difficulties for the domestic economy. The average interest rate on deposits is currently 1.5%-2% per year lower than 2013 while the lending interest rate is about 2% lower than 2013. The move helped enterprises have easier access to banking loans and create a more efficient allocation of capital in the economy.

In addition, commercial banks have proactively lowered the interest rates of old loans. Loans with annual interest rates higher than 15% account for only 3.9% of the total loans in Vietnamese dong, compared with 6.3% in 2013, while loans with annual rates of over 13% account for 10.65% of the total loans in Vietnamese dong, much lower than 19.72% in 2013.

Along with lowered interest rates, the SBV also implemented many other measures to support enterprises including focusing loans on prioritised sectors, restructuring debts, reassessing the repayment capacity of customers among others. Credit lent to small-and medium-sized enterprises grew 13.5% in 2014 while credit to high-tech enterprises and rural agriculture rose 14.8% and 12.8% respectively.

In the meantime, the national credit growth in 2014 met the whole year target of 12%-14% with improved credit quality, creating positive changes for the macroeconomy.

The year 2014 also witnessed a stable exchange rate and foreign exchange market. There were times the exchange rate increased, but quickly calmed down thanks to measures from the central bank.

In 2014, the system of credit institutions could meet demands for foreign currencies serving investment and international trade transaction. The country's foreign exchange reserves surged sharply and reached a record high, contributing to boosting the confidence of foreign investors in the macroeconomic stability in Vietnam.

Despite gaining positive results in 2014, the monetary policy regulation in 2015 is forecast to deal with challenges.

The fluctuations of the world economy, the sharp decrease in prices of crude oil, the fall of the Russian rouble and the possibility of rising interest rates from the Federal Reserve System (Fed), may create adverse impacts and pressure on the management of foreign exchange and the exchange rate. The upcoming signing of bilateral and multilateral trade agreements, such as the Trans-Pacific Partnership Agreement, will also lead to changes in regulating economic policies.

Non-performing loans, cross-ownership and others are also big challenges to the SBV in regulating monetary policy in 2015 which requires the SBV to be consistent with its targets and increase co-ordination with other ministries and agencies.

Monetary policy in 2015 should come in line with the target of maintaining an inflation rate under 5%, stabilising the macroeconomy and contributing to an economic growth rate of around 6.2%, as set by the NA at the recently concluded session in November.

The monetary policy must be implemented proactively and flexibly in parallel with fiscal policy in order to control inflation as set targets, ensure macroeconomic stability as well as ensure the liquidity of credit institutions.

The SBV needs to regulate instruments of monetary policy, such as interest rates and exchange rates, in a synchronous manner to stabilise the monetary market, ensure the stable value of Vietnamese dong and increase the nation's foreign currency reserves. It is also necessary for the SBV to focus its policies on settling non-performing loans, restructuring credit institutions and improving the quality of credit.

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