VietNamNet
Bridge – While foreign institutions have
warned that Vietnam has slashed interest rates too sharply, Vietnamese
economists believe that the interest rates should be eased further and
immediately.
“Be
cautious, Vietnam” was the warning given by Alliance Bernstein, an investment
fund management company, about the economic risks the country would face after
it slashed the interest rates too rapidly and sharply.
In the
eye of the institution, with the moves of continuously cutting down the
interest rates sharply and suddenly, the State Bank of Vietnam has been
determined to push up the economic growth. However, it should have been warned
about the heavy price the economy would have to pay – the increasing worries
among investors about the possibility of balancing the international payment
and the local currency.
The
foreign institution gave the warning in late April 2012. Prior to that, the
State Bank slashed the ceiling deposit interest rate by one percent in
mid-March, and then made another similar move in April. Meanwhile, Governor of
the State Bank of Vietnam Nguyen Van Binh once implied that Vietnam would be
very cautious in slashing interest rates, just by one percent for every
quarter.
Meanwhile,
the World Bank, at the press conference held on the occasion of the mid-term
consultative group’s meeting on May 28, also warned that if Vietnam continues
slashing the interest rates too rapidly as it is doing now, this would
influence the economic growth rate.
Though
the bank believes that Vietnamese businesses need low cost capital to develop,
the rapid interest rate reduction may cause negative impacts on the economic
growth.
Dat
Viet newspaper has quoted Tomoyuki Kimura, the ADB Vietnam Country Director as
saying that the over hastiness in slashing interest rates may put Vietnam dong
under new hard pressure. This may lead to the lessened efficiency in the
efforts to stabilize the macro economy, influence investors’ confidence and
weaken the foreign currency reserves.
Meanwhile,
Vietnamese economists do not think this way. Bui Kien Thanh, a well- known
economist has rejected the opinion that the too sharp interest rate cut would
lead to the return of the high inflation, affirming that even the 7-8 percent
interest rates would not cause inflation.
In the
interview given to Infonet, Thanh said that the interest rate reductions so far
still cannot satisfy the demand for economic growth. The sky high interest
rates of over 20 percent existing for a long time have killed a lot of
enterprises.
“The
high interest rates should be seen as a dangerous weapon for the Vietnam’s
national economy,” Thanh said.
The
State Bank needs to learn to know what the national economy needs, and how low
the interest rates should be to be sure the normal operation of enterprises.
Thanh said he does not think that the interest rate should be cut step by step
by one percent per quarter.
“If
businesses say they need the low interest rate at less 10 percent to survive,
the State Bank, within its jurisdiction, should consider the proposal and try
to force the interest rates down to less than 10 percent,” Thanh said.
“If
Vietnam still keeps hesitant in cutting down interest rates, businesses would
all die. It’s necessary to take actions to rescue businesses,” Thanh added.
The
State Bank has slashed the interest rates three times so far this year by three
percentage points in total.
However,
bankers have said that despite the deposit interest rate reductions, businesses
still have to wait three months to get the low cost capital at the interest
rates of less than 14 percent.
C. V
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