VEPR: High liquidity reduces pressure on interest rates

A transaction at Vietcombank (Photo: VNA)


Hanoi (VNA) – Contrary to 2016, credit growth expanded fast in the first half
of 2017 while mobilised capital dropped, leading to a wide gap between the two
sources.

However, the slow disbursement of public investment helped increase the
State Treasury’s deposits in commercial banks, reducing pressure on interest
rates.

The
assessment was made by Dr. Nguyen Duc Thanh, Director of the Vietnam Institute
for Economic and Policy Research (VEPR) at a ceremony in Hanoi on July 10 to
announce VEPR’s macro-economy report for the second quarter of 2017.

According
to VEPR, by June 20, 2017, credit growth reached 7.54 percent compared to that
in December last year, the highest figure recorded in the past six years. Particularly,
credit saw the fastest growth pace in the second quarter, showing the
Government’s determination to fulfill the set growth target.

Meanwhile,
deposit growth slumped compared to the same period of 2016, reaching only 5.89
percent. However, interest rates in the interbank market still fell strongly in
the second quarter. The overnight rate dropped 3.24 percentage points compared
to the previous quarter to 1.47 percent averagely in June 2017, while the weekly
interest rate also plummeted to 1.84 percent.

The
State Treasury’s deposits in the banking system are considered a main reason
behind the high liquidity in the market, according to VEPR.

The
latest report of the National Committee on Financial Supervision showed that the
State Treasury’s deposits in banks by the end of April reached 122 trillion VND
(around 5.37 billion USD), a rise of 28.4 percent compared to the beginning of this
year. This also reflected slow disbursement of public investment, said the
report.

At
the same time, deposit interest rates remained stable with only slight rises in
some long-term deposits in big commercial banks, maintaining at 6.4-7.2
percent. Interest rates for middle-term and short-term were from 4.5-5.4
percent and 5.4-6.5 percent per year, respectively.

These
conditions and the low inflation prompted the State Bank of Vietnam to cut
prime interest rate by 0.25 percentage points and lower the ceiling lending
interest rate by 0.5 percentage points. The move is expected to help interest
rates drop further in the coming time, according to the report.

VEPR
experts held that this is a proper decision that facilitates the development of
businesses.

However,
Dr. Nguyen Duc Thanh noted that the fast expansion of money supply led to a high
M2/GDP ratio, standing at 146 percent, while the figures were 80 percent in
2006 and 114 percent in 2010.

He
also warned of higher inflation in the coming time when the loosing currency
policy affects the economy.-VNA 



Link http://news.c10mt.com/search/label/vietnambreakingnews and http://news.c10mt.com


Links Topics : http://news.c10mt.com/2017/07/vepr-high-liquidity-reduces-pressure-on.html