Rising interest rates threaten economic recovery 15:41
The most important task for Vietnam in 2022 is supporting economic recovery. Policies need to be designed in a way to implement the task, and lending interest rates must not increase. According
to the General Statistics Office (GSO), as of March 21, the credit growth
rate had reached 4.03 percent (it was 1.47 percent the same period last
year). The high demand for capital and pressure from other investment
channels such as gold, securities and real estate have forced banks to raise
interest rates to attract deposits. Deposit
interest rates About
10 commercial banks have raised deposit interest rates by up to 0.6
percentage point per annum since late March. OCB,
for example, has raised the interest rate by 0.6 percentage point for 6-month
deposits, 0.5 percentage point for 9-month and 0.2 percentage point for
12-month deposits. Meanwhile,
NamABank has raised the interest rate by 0.2 percentage point for six months
deposits. MB Bank has raised the interest rate by 0.4 percent for 12-month
deposits and BacABank 0.3 percentage point for 6-month deposits and 0.1
percent for 12-month deposits. Other
commercial banks, including VietCapitalBank, SeABank, VIB, DongABank and
Techcombank, have raised the interest rate by 0.01-0.2 percentage point. The
highest interest rate at this moment, 7.6 percent per annum, is being offered
by SCB to 13-month deposits. However, it is applied only to deposits of a
minimum of VND500 billion. The
inter-bank interest rates have also increased sharply since the beginning of
the year. The interest rates of overnight loans, one- and two-week loans are
all higher than 2 percent per annum, increasing sharply compared with the 1
percent per annum in 2020-2021. Analysts
believe that interbank interest rates will continue increasing and it’s not likely
to return to the low level. They
said a new ground for interest rates is being set up. In addition to
increased demand for capital and competition with other investment channels,
the interest rates have to increase because a large amount of idle money
deposited at banks by businesses is being withdrawn from banks to pour into
production and business. Meanwhile,
the US FED has raised interest rates, leading to an interest rate upward
trend in the world’s economies, including Vietnam. Moreover, pressure on
inflation in the remaining months of the year will be high with the CPI
increasing by 1.91 percent in the first three months of the year in
comparison with the same period last year. Economists
said that interest rate increases will depend on economic recovery and
inflation. An
interest rate race may be triggered by small banks with weak liquidity. The
banks have to offer higher interest rates than other banks to lure
depositors, causing the market average interest rates to increase. If this
happens, the deposit interest rates in 2022 will be much higher than in 2021. Lending
interest rates Analysts
have warned about interest rate increases. The
Governor of the State Bank of Vietnam (SBV) has issued an action plan to
implement Resolution 11 released on January 30, 2022. The resolution said
that interest rates need to be regulated in accordance with macroeconomic
balance, inflation, and monetary policy targets. The central bank instructed
commercial banks to cut lending interest rates by 0.5-1 percent in 2022 and
2023. However,
the current factors don’t facilitate interest rate reductions. Cutting the
lending interest rates by 0.5-1 percent is a great challenge. Many banks have
set up higher business targets in 2022 than in 2021 and may raise lending
interest rates if they have to pay higher interest rates for deposits. According
to Can Van Luc, a respected economist, Vietnam’s key task in 2022 is
supporting economic recovery. All the policies need to be designed in a way
to implement the task and interest rates must not increase, or they will
hinder recovery. An
analyst said that it’s necessary to require commercial banks to slash lending
interest rates after they made high profits in 2020 and 2021, when deposit
interest rates fell sharply and lending interest rates decreased only
slightly. He
said that the NIMs of many banks are still at high levels, so deposit
interest rate increases will not have a big impact on banks’ profits. In
addition, credit in 2022 is predicted to increase sharply, which will allow
banks to make bigger profits. Curbing
lending interest rates is a must. If interest rates escalate, this will lead
to serious consequences. Higher
lending interest rates will push input production costs up. This will force
enterprises to increase selling prices of their products, creating adverse
effects on total demand. VNN |
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