The State Bank of Vietnam cut interest rates for the fourth time in six weeks to sustain the economy as the global financial crisis undermines growth.
The key rate would fall to 10 percent from 11 percent, effective December 5, the government said in a statement. The refinancing rate will decline to 11 percent from 12 percent and the discount rate to 9 percent from 10 percent, also effective from the same date.
“This is a clear message that the government will make an all-out effort to help the slowing economy after containing inflation,” said Tran Phuong Binh, chief executive officer of Ho Chi Minh City-based DongA Commercial Bank.
Vietnam’s exports, tourism and services are suffering because of the global crisis, Prime Minister Nguyen Tan Dung said on November 27, according to a report on the government’s website. The key rate will probably fall to 7 percent by mid-2009 as the government tries to maintain growth, Deutsche Bank AG said last week.
Lower rates may help revive lending for struggling industries such as construction, after steel companies warned of a sharp decline in sales.
“The central bank’s rate cut is good in general, since it will force banks to lower their lending rates,” said Hoang Thach Lan, chief analyst of HCMCbased SME Securities Co.
The central bank reduced the amount of compulsory reserves that banks have to set aside by 2 percentage points to 6 percent.
“Pull out the stops”
The government will “pull out all the stops” to promote economic growth, London-based Standard Chartered Plc said last week.
Consumer prices rose 24.2 percent in November from a year earlier, the third straight month that inflation slowed after peaking at 28.3 percent in August.
Vietnam has slashed its economic growth target for this year to 6.7 percent from an earlier goal of as much as 9 percent. The central bank has switched tack after pushing the key rate to 14 percent this year, the highest level in Asia.