The government is hinting that it would try to lower lending interest
rates to boost economic growth.
This comes as the consumer price
index stabilises to single digits, but officials still stress that inflation control is the top priority next
year.
The General Statistics Office
reported consumer price index (CPI) in November accelerated at only 0.47 per
cent against October, or 6.52 per cent against December 2011. The index in
November is much lower than it was in 2010 and 2011 when CPI respectively
reached 11.09 per cent and 19.83 per cent.
“Given economic laws, lending
interest rates decline when inflation rate declines,” Minister Vu Duc Dam,
chairman of the Government Office told a governmental press meeting last week.
High lending interest rates pose
big challenges for private enterprises hoping to expand businesses in Vietnam
during the past two years, as the government has implemented tightened monetary
and fiscal policies to rein in inflation which peaked at 18.13 per cent in
2011.
In an announcement released last
week, the government estimated that the inflation at the end of this year could
be from 7 per cent to 8 per cent.
“This is a condition allowing us
to lower lending interest rates. The government requested the State Bank to
make a plan for lowering lending interest rates within this December,” said
Dam.
At the meeting, Dam said the
government would also consider applying a cap for lending interest rates, a measure
aimed at assisting enterprises to approach capital at banks. Currently, the
government is implementing a cap for mobilising interest rate at banks.
Dam added Vietnam’s economy was
in transition progress, thus the government still had to apply administrative
measures to manage interest rate movements. However, he noted that the
government would ensure the administrative measures are not against the market
laws.
Although the government hinted
that it could ease the monetary policies, the top priority in upcoming months
and even in 2013 remains inflation control.
“The government will keep
inflation in 2013 lower than this year, while trying to boost economic growth
higher. These targets are not changed till now,” Dam said.
“The State Bank may cut rates by
100bps in the fourth quarter [2012] or early 2013. However, we expect inflation
to briefly reach double digits in the second half of 2013 due to healthcare
prices and base effects, which may shift the State Bank’s bias towards
tightening after mid-year,” Vincent Conti, economist of Asia Economics at ANZ
Banking Group, wrote in a note recently.
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