Thursday, August 13 2020


Flexible monetary policies to control inflation, support growth

Update: May, 09/2019 - 14:13


A customer performs transactions at Vietcombank's headquarters in Hà Nội. The State Bank targets a 13 per cent increase of total means of payment and credit growth of 14 per cent this year. VNA/VNS Photo Trần Việt 

HÀ NỘI – The State Bank of Việt Nam (SBV) would continue to follow a pro-active and flexible monetary policy as well as working in close conjunction with fiscal and other policies to control inflation and support economic growth in 2019.

SBV Deputy Governor Nguyễn Thị Hồng made the statement at a banking forum titled "For Vietnamese Banks’ Further Development" held in Hà Nội on Wednesday.

Hồng said the central bank targeted a 13 per cent increase of total means of payment and credit growth of 14 per cent this year, but adding adjustments could be made in accordance with the situation.

The SBV would help stabilise the monetary market through the use of open market operation (OMO) measures to regulate liquidity among credit institutions.

At the same time, the central bank would also regulate the interest rate and USD/VNĐ exchange rate policies in line with the Government’s targets and market movements, Hồng said.

She said the SBV would take intervention measures when necessary to stabilise the local foreign currency market.

With a net purchase of US$8.35 billion to date this year, the central bank has increased the nation’s foreign reserve to some $69 billion. The result was positive as it was many times higher than the country’s $711 million trade surplus in the first four months of the year.

The ample foreign currency source would help the SBV more actively regulate the exchange rate and easily take measures to stabilise the forex market if necessary.

Hồng also believed the stabilisation of the USD/VNĐ exchange rate would create favourable conditions for the country’s production and business, FDI attraction and exports.

By the end of the first quarter of 2019, the USD/VNĐ exchange rate listed at commercial banks was relatively stable compared to the beginning of the year, with the US dollar appreciating only VNĐ25 against the end of last year.

Experts forecast the exchange rate would remain stable in the second quarter, buoyed by a high interest rate gap between the Vietnamese đồng and dollar deposits, robust FDI sources, a healthy current account surplus and no interest rate hikes expected by the US Federal Reserve (Fed) and other large countries’ central banks.

Võ Trí Thành, former deputy director of the Central Institute for Economic Management (CIEM), said the interest and exchange rates had been relatively stable in the first months of 2019.

Though there remained pressure on the exchange rate due to US-China trade tensions and domestic inflation in the remaining months of the year, Thành forecast the dollar would appreciate only 2 per cent against the đồng this year thanks to rising foreign reserves and growing foreign investment inflow.

In a recent report, analysts from Fitch Group’s Fitch Solutions Macro Research also forecast that ample foreign exchange reserves would help the SBV continue its course of active interventions to ensure currency stability, which suggested the đồng was likely to see minimal volatility over the coming months.

 “The đồng will weaken slightly against the dollar to VNĐ23,700 by the end of the year and average VNĐ23,440 per dollar over 2019, which represents a 1.8 per cent depreciation from the average in 2018,” the analysts said in the report. - VNS


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