In its latest report on Vietnam’s outlook in June 2012, Hong Kong and Shanghai Banking Corporation Limited (HSBC) said that Vietnam’s impressive growth rates during the past decade often at higher than the average growth of 7 percent have now slowed due to tightening measures during 2011 to curb high inflation.
As a result, credit in 2011 and early 2012 has dropped due to high lending interest rate, businesses lack of collateral to access to bank loans and consumer demand remains low.
Inflation has fallen to one-digit level for the first time during the past two years. From now till the end of this year, HSBC expects inflation will continue to maintain at one-digit level and believes that this indicator will be hard to increase next year as the demand is still quite low.
HSBC said that, in general, the decline is a process with full of tensions and challenges in the short term but helps the government achieve progresses through reforms in recent years.
When seeing that credit growth has led to macro-economic instabilities, the government has adopted measures to tighten credit growth in recent years. HSBC analyst group predicts credit in 2012 would grow 13 percent (the credit growth ceiling that the government applies for financial institutions is 17 percent depending on the financial status of each organisation, and it is 15 percent for the whole banking systems).
Regarding interest rates, HSBC forecasts the State Bank of Vietnam (SBV) will cut interest rates to 10%/year in the second quarter, from 12%/year presently. In the third quarter, there will be a big adjustment when the interest rates fall by 2%, down 8%/year and it will remain at this level until the end of this year. Earlier, HSBC forecasted the interest rates would fall by 1 percent in each quarter and will be about 10%/year at end of the year.
The bank also said that the forex rate will remain stable at 21,500 dong/US dollar in 2012.