On January 19, 2021 in Hanoi, the National Financial and Monetary Policy Advisory Council (NFMPAC) and the Prime Minister’s Economic Advisory Group convened a Meeting under the chairmanship of Prime Minister Nguyen Xuan Phuc, Head of the Council. Governor Nguyen Thi Hong of the State Bank of Vietnam (SBV) also attended the Meeting, together with other members of the Council.
Speaking at the Meeting, Governor Nguyen Thi Hong shared that in 2020, the SBV had managed the monetary policy in consistency with the main objective of controlling the inflation. The SBV had proactively managed and closely monitored the economic developments and had been well prepared to respond to different scenarios in close coordination with the other ministries and agencies.
Governor Nguyen Thi Hong speaks at the Meeting
Governor Nguyen Thi Hong further added that those efforts by the SBV had helped enhance the resilience against the shocks caused by the COVID-19 pandemic, especially when Vietnam has one of the most open economies. Furthermore, the SBV's policies had proven to be highly flexible, reflected by the fact that the banking sector had taken actions at an early stage and issued multiple practical and timely solutions to assist the enterprises and the people to overcome their difficulties right upon the wake of the coronavirus.
In addition to that, the SBV had also paid a lot of attention to implementing the administration reform in the whole banking industry. As a result, in 2020 the SBV achieved the first rank out of the central Government ministries and agencies in the survey for the Public Administration Reform (PAR) Index for the 5th consecutive year. With the contributions to the maintenance of the macro-economic stability and the public administration reform, the SBV had continued to follow strictly the Government's policy on improving the business environment for all enterprises and the people.
A significant assistance for the SBV to achieve those successes had come from the wise ideas and initiatives made by the members of the National Financial and Monetary Policy Advisory Council. During this Council's office term, the Council had convened in total 15 meetings, two of which were held in 2020. The SBV had attended all of the Council's meetings and had paid the highest attention to the deliberations, ideas and solutions raised during these meetings.
Talking about the difficulties and challenges ahead, Governor Nguyen Thi Hong mentioned the fact that currently the enterprises' and people' demand for capital mainly depends on banks' credit sources. At present, the ratio of credit over the GDP is at 140%; if the dependency on banks' credit increased and this ratio rose up, it would pose a warning of high risks to the banking system. Therefore, the SBV Governor hoped to receive more suggestions from the Council members on possible solutions to promote the financial market segments, so that the needs for short-term loans can be met by the banking sector, while needs for medium- and long-term loans can be met by other channels, such as corporate bond market, stock market segments, etc., in order to help the banking sector to minimize the maturity risks. It is impossible for the banking sector to continue to provide credit for the medium- and long-term credit needs in the future.
Also, in the coming time, the SBV would continue to conduct necessary measures with a view to removing the difficulties for the enterprises and the people, while still ensuring the medium-term stability, e.g. the interest rate issue.
Also at the Meeting, First Deputy Governor Dao Minh Tu of the SBV presented an assessment report on the macro-economic and monetary developments, and the banking operations in 2020, and orientations for 2021. Accordingly, in 2020, the SBV had promptly and timely conducted various measures to maintain the macro-economic stability; ensure the liquidity for legitimate payment demands, the stability and smooth operations of the money and forex markets; reduce the key interest rates; maintain credit growth for production and business; remove difficulties for the borrowers; support the economy by mitigating the negative impacts of the pandemic; and supporting the economic recovery. In particularly, the SBV had ensured sufficient and timely liquidity to meet the legitimate demands for capital, contributing to maintaining the macro-economic stability; cut down the key interest rates three times, with the total reduction of 1.5-2.0% p.a.; reduced the cap for the lending interest rates by 1.5% p.a. for the priority sectors and fields, currently at 4.5% p.a.; the common lending interest rates at the commercial banks had been reduced by 1% in comparison with the common rates at the end of 2019, etc.
Besides, the SBV had also implemented various measures to support the credit growth, tackle with the difficulties for both credit institutions and the borrowers. The SBV had promulgated Circular 01 in order to create a legal framework and a breakthrough mechanism for the credit institutions to remove the difficulties for their customers (rescheduling princial debts and interests, not changing to bad debts, not calculating penalty interest for late payments, waive and reduce banking fees, etc). The SBV had also successfully organized several Bank–Enterprise Connection Conferences throughout the country, etc.
About the future orientations, Deputy Governor Dao Minh Tu shared that, implementing Resolution No. 124/2020/QH14 dated November 11, 2020 of the National Assembly and Resolutions No. 01/NQ-CP and 02/NQ-CP dated January 1, 2021 of the Government, the SBV had set out the general objectives of: Drastically, flexibly and effectively implementing the “duo goals” of controlling the coronavirus disease, protecting the people's health, and recovering and developing the socio-economy under the new normal situation; Managing the monetary and fiscal policies in coordination with other policies in a proactive, consistent and effective manner in order to remove the difficulties in production and business, and to promote the economic growth; at the same time, maintaining the macro-economic stability, controlling the inflation and ensuring the macro balances..
In his conclusion at the Meeting, the Prime Minister requested the PM's Economic Advisory Group and the National Financial and Monetary Policy Advisory Council to monitor closely the economic developments in the domestic and international markets, promptly identify any arising issues in order to provide timely advice to the Prime Minister on necessary mechanisms, policies, measures in response to a new situation; continue to recommend feasibly measures to achieve the duo goals of controlling the coronavirus disease, protecting the people's health, and recovering and developing the socio-economy; advise the Prime Minister on how to take advantage of the free trade agreements (FTAs) that had been concluded; study and come up with possible solutions to improve the governance mechanism for the state-owned enterprises.
Le Hang