HANOI: A number of factors will affect inflation in Vietnam next year, thus making it hard for lending rates to go down as expected, said Nguyen Thi Hong, deputy governor of the State Bank of Vietnam (SBV).
Speaking at a media conference in Hanoi yesterday on the central bank’s performance in 2015 and plans for 2016, she said, “Inflation will not stay low next year.” Current lending rates stand at 7-10% though the consumer price index (CPI) this year has inched up a mere 0.64% against 2014.
Asked if interest rates might fall in the coming time given the country’s ultralow inflation this year, Hong said there is some sign of inflationary pressure next year. Inflation has stayed low this year thanks to the world oil price plunge.
If oil prices rebound in 2016, they will impact on inflation in Vietnam. In addition, prices of necessities like healthcare, education and electricity will be revised up next year, impacting inflation.
Commercial banks are holding large amounts of Government bonds while G-bond sales are projected to rise next year, which will pile pressure on interest rates. The local forex market this year has been affected by a number of factors, especially the U.S. Federal Reserve’s interest rate hike and China’s surprise yuan devaluation.
To keep the forex market stable, the SBV cut the dollar deposit rates for corporate and individual depositors to 0%. It also issued Circular 15 tightening rules on foreign currency trade and ordered banks to report their forex positions.
Meanwhile, macroeconomic figures were positive as Vietnam enjoyed a trade surplus of US$500 million in October and US$260 million in November. In addition, foreign direct investment (FDI) disbursements rose by 17% year-on-year and incoming remittances edged up.
Hong said the central bank will adopt a flexible approach towards the dong-dollar exchange rate depending on domestic and world market developments. The SBV is taking measures to supervise the financial and monetary markets. Data of the central bank released yesterday showed that credit growth could reach 18% this year.
As of December 21, credit had expanded 17.17% against the beginning of 2015, higher than in the same period in 2011-2014. Outstanding loans for the agricultural sector had risen 11% by December and those for enterprises using advanced technologies up over 45% as of October.
A source told the Daily that banks have stepped up lending at year-end and lending at some lenders has exceeded the permissible levels set by the central bank. According to the report, 99.6% of bad debt at banks had been settled as of November 30. The bad debt ratio in the banking system had dipped to 2.72% by end-November, lower than the projected 3%.
The central bank said statistics about bad debt at banks have become more transparent since the first quarter of this year. The safety and stability of credit institutions have improved.