Phạm Thanh Hà, Deputy Governor of the State Bank of Vietnam.

In the new national era, the State Bank of Vietnam (SBV) will continue to advance its monetary policy management achievements. The focus will be on enhancing the resilience of the economy to fluctuations in both the global and domestic environments, with a firm commitment to curbing inflation, stabilising the macro-economy, supporting growth, and reinforcing the autonomy and independence of the economy amid international integration. The Deputy Governor of the Central bank Phạm Thanh Hà, talked to Vietnam News Agency about  monetary policy management.

Looking back on 2024, how effective was the SBV’s monetary policy in stabilising the macro-economy, controlling inflation, supporting growth and stabilising the financial market?

2024 marked a pivotal year in achieving the goals of the socio-economic development plan for the 2021-25 period. Following the guidance of the National Assembly, the Government and the Prime Minister, the SBV implemented a proactive and flexible monetary policy, ensuring close co-ordination with fiscal policy and other macroeconomic policies. This approach significantly contributed to economic growth, macroeconomic stability and inflation control.

We managed liquidity in the money market effectively, ensuring exchange rate stability and providing credit institutions with access to low-cost capital. This allowed us to support the economy while maintaining stable interest rates despite global interest rates remaining high. Additionally, we took measures in the foreign exchange market to absorb external shocks, particularly in the face of pressures from fluctuating international currency values.

In credit management, we set a credit growth target of around 15 per cent for 2024, making necessary adjustments based on real-time developments. We communicated these targets transparently to credit institutions, enabling them to proactively manage their lending. We also adjusted the credit growth target twice on August 28, 2024 and November 28, 2024, which was essential to meeting capital needs for the economy, promoting business development, and supporting overall economic growth. Despite the challenging global environment, we successfully achieved key targets: a 7.09 per cent economic growth, surpassing the National Assembly’s target of 6.5 per cent and stable inflation control at 3.63 per cent, in line with set goals.

In 2024, with fluctuating global economic conditions, how did the SBV manage exchange rates and interest rates to support businesses and stabilise the financial market?

2024 presented complex global economic fluctuations. While the international US dollar pressure eased in the third quarter, due to a decrease in global inflation and signs of declining global interest rates, there were periods of significant pressure on domestic interest rates and exchange rates. Factors like the Fed’s policy, the US presidential election and geopolitical tensions contributed to rapid fluctuations in the US, leading to increased devaluation pressures on local currencies, combined with domestic challenges such as the negative interest rate differential between the Vietnamese đồng and US dollar.

In response, the SBV adopted a flexible approach to managing exchange rates, mitigating external shocks and stabilising market liquidity. We also sold foreign currency when necessary to ensure the economy’s foreign currency needs were met. By maintaining appropriate operating interest rates and encouraging credit institutions to reduce lending costs, we were able to support the economy while stabilising the financial market.

The lending interest rate level tends to decrease sharply (in 2023, it decreased by more than 2.5 per cent a year compared to the end of 2022 and by November 30, 2024, it decreased by more than 0.4 per cent a year compared to the end of 2023. At four State-owned commercial banks including Vietcombank, BIDV, Agribank and VietinBank, the lending interest rate level has decreased by nearly one per cent. This reduction was crucial in supporting businesses and maintaining market stability.

Could you elaborate on the SBV’s monetary policy orientation for 2025, particularly in balancing economic growth with inflation control?

Looking ahead to 2025, we expect the global economy to remain challenging, with uncertainties surrounding inflation, geopolitical tensions and commodity price fluctuations. Việt Nam’s economy, while open, faces internal challenges such as a struggling real estate market, unresolved corporate bond issues and reduced production capacity in some sectors due to the after effects of the COVID-19 pandemic, along with the trend of tightening and cutting spending by people.

Given these challenges, global institutions such as the IMF, World Bank and the ASEAN+3 Macroeconomic Research Office (AMRO) have noted that Việt Nam has limited room to ease its monetary policy and should instead leverage remaining fiscal space to support growth.

While the SBV has successfully anchored inflation expectations in recent years, the risk of inflation in 2025 remains significant, particularly given the external and domestic uncertainties. Any delay in responding to inflation could lead to adverse consequences for the economy. Therefore, the SBV will focus on closely coordinating monetary policy with fiscal and other macroeconomic policies to ensure sustainable economic growth.

In that context, the SBV's monetary policy management in 2025 will focus on the following key and basic solutions:

First, we will monitor global and domestic developments to manage monetary policy in a timely and effective manner, ensuring alignment with fiscal policy and prioritising economic growth, production, and business support.

Second, we will continue to operate monetary tools flexibly, stabilising the money market and ensuring liquidity support for credit institutions while aligning interest and exchange rates with broader macroeconomic objectives.

Third, we will manage credit growth in line with economic needs, prioritising sectors that contribute to production and business. Our focus will be on supporting priority areas through targeted credit programmes, while ensuring safe and effective lending practices.

How do you assess the role of the banking sector in supporting the socio-economic development strategy for the next five years, especially with the goal of achieving double-digit economic growth?

Over the past four decades of Đổi mới (Renewal), Việt Nam has seen immense progress, with the country’s economy growing 96 times and positioning itself as one of the world’s 34 largest economies. This transformation reflects the contributions of various sectors, including banking, in controlling inflation, stabilising the economy and supporting financial market stability. The banking sector has also stabilised the monetary and foreign exchange markets, consolidating and developing the system of credit institutions safely and healthily, expanding international co-operation, innovating and improving service quality, increasingly meeting the capital needs of the economy more effectively.

In the upcoming era, Party General Secretary Tô Lâm pointed out seven major tasks to be done from now until the 14th National Party Congress, focusing on three tasks to solve three major bottlenecks in terms of institutions, infrastructure and human resources. These tasks must be carried out synchronously, but the first task must be to immediately change the institution, so that there will be a synchronous and modern infrastructure, from economic infrastructure to social infrastructure, the whole Party and the whole people have one will and one action to carry out.

In that context, the banking industry will continue the tradition of 70 years of formation and development, focusing on the following major tasks:

First, we will ensure that monetary policy adapts to global and domestic challenges, contributing to inflation control and macroeconomic stability, while enhancing the autonomy of the economy in the global integration process.

Second, the banking system will be restructured to meet international standards, improving the efficiency and transparency of capital circulation.

Third, we will continue to perfect the legal framework for banking activities, ensuring it aligns with evolving economic needs.

Lastly, we will promote the development of innovative banking services, enhance administrative reforms, and support the country’s digital transformation efforts, contributing to the digital economy and society. VNS