According to KBSV, the State Bank may lower the operating rate in the last 6 months of the year in an effort to balance the target of economic growth and stabilize the macro. The signals showing that inflation will cool down in the coming time is a necessary condition for the State Bank to offer another round of lowering operating rates.
Illustration. (Source: SBV)
New data released by the State Bank (SBV) showed that as of July 28, the credit in the economy increased by 3.45% compared to the beginning of the year, only 0.2% higher than level 3, 26% at the end of June. Credit growth in the first 7 months of 2020 is much lower than the same period in 2019 (7.13%), also the lowest level in the past 7 years.
KB Securities (KBSV) said that the slowdown in credit growth along with the index of industrial production and PMI is a remarkable signal that the economy, especially the industry Production is still facing many difficulties for recovering from the COVID-19 epidemic. Credit growth data from commercial banks in the first 6 months of the year, some banks such as BIDV, VietinBank, Techcombank are facing difficulties in settling capital output in the condition of not being able to lower lending standards due to concerns of bad debts. .
In its macroeconomic outlook report for the last 6 months of the year, KBSV assessed that it is unlikely that the SBV will continue to lower its operating rates, provided credit growth recovers and the COVID-19 translation is completely controlled at Vietnam.
However, with the recurrence of COVID-19 at the end of July and low credit growth, the analyst team leaves open the possibility that the State Bank will continue to move to lower the operating rate at least once in an attempt to achieve the economic growth target of 3-4% set by the Prime Minister recently.
“We leave open the possibility that the State Bank will continue to lower the operating rate in the last 6 months of the year in an effort to balance the target of economic growth and macroeconomic stability”, the KBSV report said.
However, according to KBSV, in the volatile domestic and international context, macro stability goals still need to be prioritized. The volatility of average inflation, forecast to increase by 4%, will be the key factor deciding whether the State Bank will continue to pursue an easing monetary policy in the last 6 months of the year.
“The signals showing that inflation will cool down in the coming time is a necessary condition for the State Bank to offer another round of lowering operating rates”, KBSV said.
KBSV also forecasts that deposit and lending interest rates are expected to continue to decline in the coming time with 3 main factors: 1) interest rate adjustment expectation; 2) liquidity in the system is forecast to remain redundant in the second half of the year; and 3) The State Bank is expected to extend the schedule of tightening short-term capital for medium and long-term loans to relieve pressure on the structure of banks’ mobilized capital.
In fact, up to the beginning of August, the deposit interest rates continued to be reduced in most commercial banks, with a decrease of about 0.2 – 0.5 percentage points compared to the beginning of July.