On July 2, 2020, the Government held a conference with the local authorities to assess the socio-economic situations in the first six months of the year, and disseminate the tasks for the second half of 2020. Speaking at the Conference, Governor Le Minh Hung of the State Bank of Vietnam (SBV) said the banking industry is committed to continuing to supply timely and sufficient capital to the economy.
Informing on the implementation of the SBV’s management tasks during the first six months of 2020, Governor Le Minh Hung shared that the SBV has conducted the monetary policy instruments in a flexible manner, ensuring the liquidity of the economy and the banking sector, while still maintaining control of the inflation and stabilizing the business environment.
The core inflation of the first six months was at 2.81%, showing flexible management of the monetary policy, which has contributed to maintaining the average inflation rate of about 4.19%. This has been an important factor creating the foundation and maintaining the confidence of the communities of domestic and foreign investors in the business environment and the macro-economic stability of Vietnam.
Concerning the interest rates, the SBV has significantly cut down the key interest rates by 1.5% after two consecutive reductions. In addition, the SBV has strongly directed the credit institutions to cut down on costs and reduce profits in order to lower the lending interest rates. Therefore, the common lending interest rates applied to the existing loans and new loans have gone down remarkably.
Regarding the exchange rate management, according to the SBV Governor, in the first 6 months, the exchange rates were relatively stable, varied slightly within the range of 0.2% to 0.3%, and the foreign exchange reserves reached the highest level. The stability of the exchange rates has contributed significantly to stabilizing the inflation.
“This is also an important factor for the credit rating agencies to maintain Vietnam's credit ratings, as well as to maintain the investors’ confidence. This is also especially an important element to help us attract more investment, contributing to the economic recovery in the post-pandemic time”, the Governor noted.
Regarding the credit growth, although the demand for credit in the first months, especially in April and May, was quite weak, by now credit has regained its growth. By June 29, the credit growth was at 3.26%, a relatively strong increase since May. Governor Le Minh Hung added, the credit growth was only at 1.13% in March, 0.12% in April, and 0.53% in May, but by June 29, the credit growth returned to 1.28% on a month-by-month basis.
On the first days of July, 2020, the SBV proactively adjusted the targets for credit growth for many commercial banks, including the state-owned commercial banks and private joint stock commercial banks, in order to support the economic growth.
With a view to sharing and removing the difficulties for the economy, as Governor Le Minh Hung pointed out, the SBV has issued Circular No. 01/2020/TT-NHNN with breakthrough measures of rescheduling debt payments, maintaining debt categories; during the period of rescheduling debts, the borrowers do not have to pay the principal and interest on due loans, waiving and reducing bank fees and interest. Those were robust measures, together with the organization of a series of Bank – Enterprise Connection Conferences in various provinces and key economic regions in order to work directly with the business associations and the credit institutions, as well as to listen to the ideas and reactions of the business community to help remove their practical difficulties.
Until now, the whole banking sector has rescheduled debt payments for nearly 260,000 borrowers with the loan outstanding of approximately VND 180,000 billion; waived and reduced the interest for about 421,000 borrowers with the loan outstanding of approximately VND 1,300 trillion; provided new loans with preferential interest rates (0.5-2.5% lower than the rates applied before the outbreaks) with the accumulated amount of VND 1,100 trillion for about 240,000 borrowers.
On the orientations from now to end of the year, Governor Le Minh emphasized that the monetary policy management would continue to be in accordance with the Government’s directions of controlling and maintaining the macro-stability with the key targets on promoting the economic growth. Therefore, the banking sector is committed to supplying timely and sufficient capital to the economy, while still regulating the exchange rates in a stable manner and standing ready to intervene in the market in case of any fluctuations causing macro instability.
Moreover, the SBV would also continue to direct the credit institutions to cut down their operating costs and profits in order to further reduce the lending interest rates, while still ensuring the safety and operational quality of the credit institution system.
Le Hang