SSI Research: savings interest rates to decrease in 2020

14-Jan-2020 Intellasia | Tri Thuc Tre | 12:07 AM Print This Post

Financial and monetary market report 2019 of SSI Securities Corporation (SSI Research) said that, along with the initiative to respond to ensure the stability of the monetary market, the State Bank of Vietnam (SBV) had been very consistent with its long-term goal of improving high quality and capacity of the commercial banking system.

The results achieved in 2019 had increased market confidence in the SBV’s management capacity as well as the predictability of regulatory policies, which was a crucial factor in increasing the attractiveness of the Vietnamese market.

In line with global trends, monetary policy in 2019 had shifted towards a more pronounced easing. SBV had simultaneously reduced the rates of administration, in which decreased open market operation (OMO) interest rates twice and three times reducing of treasury bill rates, the total reduction was 0.75%. The fluctuation of interest rates on the interbank has decreased significantly, about 2.25 percent to four percent per year.

SBV also lowered the ceiling interest rate on maximum deposits in dong of commercial banks, with demand deposits at terms of less than one month were 0.8 percent per year, and terms from one to less than six months were five percent per year (the old rate was one percent per year and 5.5 percent per year). The short-term lending interest rates in dong of commercial banks with five priority areas decreased to six percent per year (the old rate had been 6.5 percent per year) since November 19, 2019. With the above requirements, the real mobilising interest rates of banks had dropped sharply in terms of less than six months. The interest rates for terms of over six months were still high, but the decreasing signal had begun to appear.

By 2020, SSI believed that deposit rates were likely to continue to fall based on two platforms, including the liquidity of the banking system and direction from the government. Commodity prices and the foreign exchange market were variables that could accelerate or slow down interest rates.

The reduction in interest rates for long terms would still differentiate between large and small banks due to the regulations on reducing the ratio of short-term mobilised capital for medium and long-term loans. However, the control of small banks in 2019 had brought results, helping to limit interest rate race in the future.

Credit growth in 2020 would be kept at the same pace as 2019, possibly lower. Vietnam’s current credit scale had reached 8.2 quadrillion dong, equal to 138 percent of the gross domestic product (GDP), which was a relatively high rate while this ratio would continue to increase in the next few years due to the difficulty in exceeding credit growth of GDP growth.

Although the capital market had overgrown in the past few years, the scale of capital mobilisation (both stocks and bonds) through the capital market was small, unable to replace the position of credit in financing for the economy.

Although the total credit might increase slowly, the credit for priority industries or production and business, in general, would still increase. In 2019, credit for small and medium enterprises increased by 16%, high-tech enterprises increased by 15%, while general credit increased by less than 14%.

 

 


Category: Finance, Vietnam

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