CATEGORIES

© Copyright 2004; Hanoitimes - Economic and Urban Newspaper;

The tribune of Hanoi People’s Committee

Publication Permit: 29/GP-CBC

Editor - in - Chief: Nguyen Thanh Loi

Managing Editor: Ta Thu Giang

Email : thugiang@hanoitimes.vn

Head Office: 21 Huynh Thuc Khang Street, Dong Da District, Hanoi

Branch Office: 221 Tran Phu Street, Ha Dong District, Hanoi

WORDS ON THE STREET 70th anniversary of Hanoi's Liberation Day Vietnam - Asia 2023 Smart City Summit Hanoi celebrates 15 years of administrative boundary adjustment 12th Vietnam-France decentrialized cooperation conference 31st Sea Games - Vietnam 2021 Covid-19 Pandemic
Home / Economy / Banking & Finance
Brokerage sees higher interest rates in Vietnam in 2019
Ngoc Mai 06:31, 2018/09/16
In 2018, inflation is estimated at 4% year-on-year, the highest level since 2014.
Due to external and internal risks, including tightening of monetary policies and trade tension in the global economy and higher inflation of the local economy, interest rates in Vietnam are expected to rise in 2019, according to Viet Dragon Securities Corporation (VDSC). 

On the front of external risks, tightening of monetary policies is directly leading to rising global borrowing costs after a long period of favorable global financing conditions, stated VDSC in its latest report.

In the US, there are likely two more interest rate hikes in the latter part of 2018 as inflation is close to the FED target. The FED's objective is 3.5% for the benchmark rate by the end of 2019. The European Central Bank (ECB) will close its asset purchase program by 2018 while the Bank of Japan (BOJ) is likely to reset its inflation and monetary policy targets.

In addition to the US Dollar appreciation, oil price hikes as well as trade tension risks, the pressure on rising borrowing cost is spreading out and threatening the financial stability as well as credit quality in many countries. High foreign currency denominated debt countries are vulnerable to global tightening monetary policies. Various countries have started to raise their benchmark interest rates to fight against inflation and investment outflows.

In Asia, India lifted its interest rate for the second straight time in 2018. In ASEAN, four big-GDP countries, including Singapore, Indonesia, Malaysia and Philippines, decided to tighten financial conditions while Vietnam and Thailand haven't yet taken actions.

On the front of internal risks, there is no doubt that a higher inflation directly creates upward pressure on interest rates. Inflation has been on an uptrend after bottoming at close to 0% in 2015. Higher oil and food prices are partly responsible for rising prices in general. Trade tariffs could also potentially boost inflation. 

In 2018, inflation is estimated at 4% year-on-year, the highest level since 2014. Currently, the discount rate dropped to 4.25% per annum from 4.5% per annum in July 2017 while the 6-12-month deposit rate stood at 6.5% per annum.

In addition to inflation pressures, the depreciation of the dong also threatens Vietnam's low interest-rate environment. Up to the middle of August 2018, banks' trading FX rate has risen by 2.7% year-to-date while the central FX rate added 1.2%. Notably, the free FX rate increased by approximately 4%. 

The policy sets the USD deposit rate at 0% while the USD short-term lending rate is around 2.8 - 4.7 %/year. In order to make the dong more attractive, the VND deposit interest rate is set above the sum of the dong's depreciation and the USD deposit interest rate. That means pressure on VND interest rates.
Comments
Other news
15:51, 2025/02/24
Vietnam set to have digital banks within financial centers
Credit institutions headquartered in these financial centers will not be bound by restrictions on to foreign ownership or foreign investment conditions when providing services there or across borders.
14:30, 2025/02/15
Hanoi expands cashless parking pilot program
Hanoi is advancing its efforts to integrate technology into urban management by expanding the pilot program for cashless parking payments throughout the city.
16:58, 2025/02/11
Prime Minister urges banks to prioritize economic support over profits
One of the key priorities for the banking sector is to support small and medium-sized enterprises (SMEs), as they generate a large number of jobs and contribute significantly to the economy.
17:23, 2025/02/07
Vietnamese Gov’t forecasts CPI growth of up to 4.5% in 2025
With the goal of at least 8% GDP growth, the money supply in the economy will be significantly larger than in 2024. This will have an impact on price indices, particularly consumer prices.
17:51, 2025/01/07
Vietnam prioritizes agriculture and renewable energy for access to green loans
The move is part of the government’s effort to accelerate economic restructuring and build resilience to climate change while protecting the environment.
16:49, 2025/01/06
Vietnam GDP expands by 7.09% in 2024
The 2024 growth rate is considered positive amidst global uncertainties and domestic challenges such as natural disasters.