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NFSC report hints at further rate cuts for H2

Update: August, 05/2014 - 09:23
Except for January with Tet (Lunar New Year) holidays, inflation rates have always been below 5 per cent this year.— Photo Vnexpress

HA NOI  (VNS) — Credit institutions could further cut interests on deposits and borrowing costs on falling provisional inflation rates in the latter part of this year, a financial report has suggested.

According to the National Financial Supervisor Commission's latest report on the first seven-month period, cited by Thoi Bao Kinh Te Viet Nam (Viet Nam Economic Times), the average interest rate for Vietnamese dong deposits was an estimated 5.53 per cent yearly, down 0.6 percentage point over last December.

Annual lending rate was about 10.08 per cent, 0.25 percentage point lower than the end of last year.

"Inflation forecasts see a stable low trend toward the year-end. Interest rates may be additionally trimmed to support production and business," said the report.

"However, deposit interests may fall at a faster rate than borrowing cost," it added.

In the first seven months, overall inflation rates remained lower than 5 per cent, excluding January for Luna New Year festivals. Core inflation, which eliminates certain items that face volatile price movements or shocks such as food, food stuff and public essential services, even went under 4 per cent.

In terms of investment, NFSC reported that in H1, investment from private sectors accounted for 10.3 per cent of the GDP compared to 11.1 per cent in the same period last year. Foreign direct investment in the first seven months rose by 2.3 per cent while in seven months last year it was 6.4 per cent.

The commission said that one of factors behind the low rate of investment was the ongoing sluggish credit growth.

Banks are struggling to increase lending, which is indicated through a low credit growth of only 3.52 per cent in the first six months, of which dong loans increased by 2.17 per cent, dollar loans up 12.3 per cent.

Viet Nam's 12 per cent credit growth in 2014 is likely to rest on the second half of the year. — VNS

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