VCN-There is still an imbalance in the Vietnamese financial system as the credit institution sector accounts for a large proportion of the total system assets and plays a major role in providing capital to the economy.
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|PhD. Can Van Luc, Chief Economist of Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV).|
Talking with reporters fromCustoms Newspaper, the finance and banking expert, PhD. Can Van Luc, Chief Economist of Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV), said that this is the main reason why it is difficult to reduce interest rates because banks have to keepdifferent interest between input and output high interest rates compared to the regional average.
The first month of 2020 has passed, how do you assess the interest rates situation of countries in the world in 2020?
In 2019, most countries in the world reduced interest rates. According to BIDV research center, there are 63 central banks in the world reducing interest rates with a total of 148 reductions, such as the US Central Bank (Fed) three times a year. However, this year, countries have also reduced the momentum of interest rate cuts.It means that they can continue to decrease, but not as often as in the previous year. The reason is that the current interest rates are very low, so countries find that monetary instruments do not have many methods to reduce, so it is imperative that countries use fiscal policies.
In addition, some countries are concerned about inflation, so they do not want to reduce interest rates too much, causing inflation to rise, especially oil and gold prices are still volatile that could lead to high inflation.
In Vietnam, how will the situation affect the interest rate level, sir?
In my opinion, this year, the input interest rate in Vietnam will be basically stable, but insome respects, the interest rate may increase. The reason is that the demand for capital mobilization for the economy is still high, especially medium and long-term capital. Moreover, the banking system must meet Basel II standards; continue to comply with the Circular No. 22/2019 / TT-NHNN of the State Bank of Vietnam (SBV) stipulating the prudential limits and ratios in operations of banks and foreign bank branches in the direction of descending use of short-term capital to reduce medium and long-term loans. Accordingly, this year, banks must reduce this rate to 37 percent; this rate inthe previous year was 40 percent. This may not be too difficult, as the ratio is currently 38 percent.
However, banks have to pay more attention toraising medium and long-term capital. Moreover, the corporate bond market is still developing positively, but not so suddenly, and is expected to increase by 7-10percent this year, while last year it increased by about 11 percent. Meanwhile, the demand for credit is quite high,because this year the State Bank of Vietnam is still aiming for credit growth of 13-14 percent, similar to 2019.
As for the output interest rates, in the context of lower interest rates in countries around the world, Vietnam must also pay attention to investment channels with many changes such as gold, securities, real estate. Therefore, banks need to consider that if the saving interest rate is at an unattractive level, it is difficult for the banking system to attract capital to serve the economy. Therefore, this year, it will be difficult to reduceinterest rates, keep the same level as last year, or be similar to the last months of the year, which is slightly reduced.
Output interest rates are difficult to reduce because current interest rates are not a credit bottleneck in the economy. Moreover, real interest rates after deducting inflation are at an average level compared to the region. Specifically, the 5-year average real interest rates at 4.8-5 percent is still high because Vietnam is still at risk, moreover the transaction costs of the whole economy are high, the capital market has not developed yet, mainly depending on the banking system. Therefore, the input-output gap is relatively low: 2.6-2.7 percent compared to the regional average of 2.9-3 percent.
|Interest rates may be stable in 2020. Photo: Internet|
Along with the above reasons, in your opinion, what are the challenges of the economy to the interest rate level in Vietnam?
The challenge for the economy this year is that inflation is higher than last year due to the sharp increase in pork prices in the last months of 2019 and early 2020.Inflation in January 2020 has been relatively high. At the same time, US-Iran tensions also caused oil and gold prices to rise in the first days of the year. Therefore, the management of monetary policy must be really careful to ensure the inflation target this year. Therefore, with these challenges, if the input interest rates remain the same as at the end of 2019, which means a slight decrease, it will be successful.
By Huong Diu/Bui Diep