The driving force for the economy

VCN - Operating monetary policy in a more relaxed direction from the beginning of the year helps maintain policies to support businesses, creating a driving force for economic development in the remaining months of the year.
Core inflation in May and the first five months of 2021 are both the lowest levels in the past five years
Core inflation in May and the first five months of 2021 are both the lowest levels in the past five years

Inflation variable

2021 is not a simple year in dealing with the management of monetary policy.

According to economic expert, Dr. Vo Tri Thanh, the Covid-19 pandemic is still complicated, with the 3rd outbreak at the beginning of the year and the 4th outbreak at the end of April.

This has had a strong impact on businesses, thereby affecting the banking industry with the fear of increasing bad debt. Besides, inflation pressure in 2021 is expected to be greater than in 2020, if the monetary policy loosens too much, it will increase financial risks and put pressure on inflation, but if tightened, it will have an impact on economic recovery.

However, the reality in the past six months has shown that the management of monetary policy is very favorable and there have been significant highlights to support the economy.

Statistics from the General Statistics Office show that the average core inflation in the first five months of 2021 increased by 2.9% over the same period in 2020. Core inflation in May and the first five months of 2021 are both at the lowest level in the last five years.

Moreover, the fact that many central banks continue to operate loose monetary policies, accompanied by an abundant supply of foreign currency from remittances, trade surplus and disbursement of foreign capital also helps the value of Vietnam's dong remain stable, the exchange rate with foreign currencies remained "flat" for most of the time, strongly supporting domestic import and export activities.

In particular, thanks to the stable exchange rate, the price movements of precious metals, including gold, are also quite stable. Although the domestic gold price is still "shining" at a high price range, there have not been strong gains, causing a "shock" to the market.

According to the assessment of Dr. Can Van Luc and the authors of the BIDV Training and Research Institute, one of the factors to reduce inflation pressure in Vietnam is that up to now, Vietnam's major balances are in a better state.

Compared with the previous period, the relationship between supply and demand for foreign currencies is quite stable, the gold market is better controlled.

Since the beginning of the year, the VND has increased slightly (0.22% against the USD), so the exchange rate for the whole year is forecast to increase by about 0.5-1%. Moreover, monetary policy, fiscal policy and price are becoming more and more in tune, clearly showing the coordination in the issuance of Government bonds.

Interest rate highlights

The most notable highlight of the monetary policy is that the operating interest rate toolkit continues to be maintained by the State Bank of Vietnam (SBV) compared to the end of 2020, including the ceiling deposit and lending rates, the lending rates to commercial banks on the open market or through the discount window. Maintaining stable operating interest rates in the context of complicated pandemic developments has helped increase aggregate demand, contributing to the recovery of economic growth.

Moreover, although interbank interest rates increased slightly in May and June, they remained low, showing that liquidity at banks is abundant, thereby increasing the ability to push capital outflows into the economy.

Surveys at banks show that lending interest rates are still stable compared to the end of 2020. Credit growth is therefore much better than the same period in 2020.

According to analysis by Securities Company Rong Viet Securities (VDSC), the State Bank is choosing a "carrot and stick" approach to credit risk management. As a result, banks will be motivated to improve their operations and be more cautious in risky and speculative lending activities.

However, although maintaining low interest rates will create more room to reduce lending rates, it will create many concerns about cash flow into risky areas, including the unlicensed financial sector in Vietnam such as digital currency, foreign exchange (forex) exchange.

The proof is that the stock market has welcomed a large number of F0 investors, or the fever of the real estate market at the beginning of the year. Therefore, risks for the money market are always present, so choosing investment channels will be very difficult in the remaining months of the year.

Fiscal-monetary “resonance”

In the context of intertwined challenges and opportunities, Government leaders have directed the Ministry of Finance and the State Bank of Vietnam according to their assigned functions and tasks to continue to closely coordinate and implement flexible fiscal and monetary policies, ensuring consistent implementation of the goal of macroeconomic stability, controlling inflation and supporting production and business, while promoting economic growth. At the same time, the State Bank should continue to direct credit institutions to minimize costs, continue to reduce lending interest rates to contribute to solving difficulties for businesses; ensure the safety of credit and banking activities.

For economic recovery, it is necessary to have "resonance" of both monetary policy and fiscal solutions. According to Pham Thanh Ha, Director of the Monetary Policy Department (SBV), the coordination between the SBV and the Ministry of Finance has been implemented synchronously and closely to successfully carry out the tasks assigned by the National Assembly, the Government and the Prime Minister, thereby supporting to control inflation below 4%, stabilize the macro-economy, and strengthen the resilience of the economy to adverse shocks.

Also on this issue, Dr. Can Van Luc and a group of authors from the BIDV Training and Research Institute believe that it is necessary to further improve efficiency in monetary and fiscal policy coordination; focus on effectively implementing fiscal and monetary support solutions to be correct, successful and effective; strengthen the coordination of dosage and timing of market regulation, especially the bond market; continue to strengthen the corporate bond market, thereby reducing pressure on credit capital, diversifying channels of mobilization and distribution of capital in the economy.

The above issues show that in the last months of the year, it is necessary for monetary policy to continue to be proactive, flexible and harmoniously coordinated with other macroeconomic policies. Because stable currency will be the premise and motivation for economic targets to be completed, helping to stabilize import and export activities and businesses.

By Binh Nam/ Huu Tuc

Related News

Credit and access to credit: A problem for banks and businesses

Credit and access to credit: A problem for banks and businesses

VCN - Since the beginning of the year until now, the Prime Minister, the Government and the State Bank (SBV) have continuously issued instructions to promote credit, but the situation of banks having excess cash and businesses lacking capital is still a concern of the economy.
The "ambitions" and proposals of state-owned enterprises

The "ambitions" and proposals of state-owned enterprises

VCN - Despite the difficulties, 2024 also opens up many opportunities, and state-owned enterprises (SOEs) have proposed many plans to develop businesses, motivating them to make significant contributions to economic development.
Electronic products are the driving force for export growth

Electronic products are the driving force for export growth

VCN - The export growth momentum in early 2024 is assessed to have a major contribution from all types of phones and components.
Bank interest rates plummet

Bank interest rates plummet

VCN – Deposit interest rates continue to edge down in the last month of 2023. The lowest deposit interest rate at Vietcombank is only 2.2%/year for 1-month term deposits.

Latest News

Efficiency from inspection and supervision - a key factor for a transparent stock market

Efficiency from inspection and supervision - a key factor for a transparent stock market

VCN - Since the 2019 Securities Law officially took effect, the average annual number of penalty decisions has more than doubled compared to the period 2015-2020. This shows that the strictness of the law is being enforced effectively.
SBV approves designation of 14 important banks in 2024

SBV approves designation of 14 important banks in 2024

The State Bank of Vietnam (SBV) has issued Decision No. 538/QD-NHNN approving the group of credit institutions and foreign bank branches which play an important role in the country's banking system in 2024.
Central bank urges card issuers to review procedures

Central bank urges card issuers to review procedures

The State Bank of Vietnam (SBV) has issued a directive, demanding commercial banks to review their procedures in issuing and managing bank cards.
Warning about impersonating tax authorities to commit fraud during  tax finalization month

Warning about impersonating tax authorities to commit fraud during tax finalization month

VCN - The Tax industry has continuously provided information and issued warnings about impersonating tax officials and tax authorities to commit fraud against taxpayers, but there are still people who fall into the trap of these fraudsters, especially during the peak month of tax settlement.

More News

“3 priorities, 3 breakthroughs” in task deployment of State Treasury

“3 priorities, 3 breakthroughs” in task deployment of State Treasury

VCN - To complete the task from now until the end of 2024 and successfully implement the State Treasury Development Strategy as planned, Deputy Minister of Finance Bui Van Khang stated "3 priorities, 3 breakthroughs" " and 7 notes in task performance.
Effectively apply M&A to go long distance

Effectively apply M&A to go long distance

VCN - With advantages such as being cheaper than domestic capital, and accompanied by many factors such as technology, skills, management, market... foreign capital is a popular trend among businesses. Domestic enterprises seek through M&A activities to ensure sustainable development for the future.
Hanoi State Treasury proactively digitizes and transforms operating methods

Hanoi State Treasury proactively digitizes and transforms operating methods

VCN - Hanoi State Treasury always proactively transforms and reforms its operating methods with the motto of “taking customers as the center” and taking the satisfaction of organizations and individuals as a measured level of task completion by civil servants.
The Ministry of Finance continues to strongly improve the business environment, reducing the rate of businesses temporarily suspending operations

The Ministry of Finance continues to strongly improve the business environment, reducing the rate of businesses temporarily suspending operations

VCN - The Ministry of Finance aims to continue to strongly improve the business environment, create a healthy competitive environment, rapidly increase the number of newly established businesses, and reduce the rate of businesses temporarily suspending operations; reduce input costs and legal compliance costs in investment and business activities, reduce policy risks, strengthen trust, create a fulcrum for recovery and improve business resilience.
Vietnam tackles obstacles to stock market upgrade

Vietnam tackles obstacles to stock market upgrade

Vietnam's ambition to elevate its stock market from "frontier" to "emerging" status by 2025 faces two key hurdles, including pre-trade margin requirements for foreign investors and foreign ownership ratios in certain sectors, said Deputy Director of the Securities Market Development Department under the State Securities Commission (SSC) Pham Thi Thuy Linh.
Looking forward clear instructions in tax finalization in 2023

Looking forward clear instructions in tax finalization in 2023

VCN - Mr. Hoang Quang Phong (photo), Vice Chairman of the Vietnam Chamber of Commerce and Industry (VCCI) discussed supporting taxpayers in tax finalization in 2023.
Proactive in dealing with exchange rate pressure

Proactive in dealing with exchange rate pressure

VCN - Recently, the State of Bank (SBV) withdrew VND 30,000 billion through the T-bills channel, contributing to reducing exchange rate pressure. This is just one of the moves of the monetary policy management agency to stabilize the foreign exchange market, contributing to supporting the macro economy as well as import-export business activities of enterprises.
Tax sector accompanies and supports tax finalization

Tax sector accompanies and supports tax finalization

VCN - In the first months of 2024, the Tax sector has deployed peak months to support tax finalization in many different forms, thereby solving many problems in settlement of corporate income tax and personal income tax for taxpayers.
Minister of Finance: Fairness and transparency for the insurance market

Minister of Finance: Fairness and transparency for the insurance market

VCN - According to Minister of Finance Ho Duc Phoc, the Ministry has strengthened inspections to correct violations in the insurance sector, demonstrating fairness and transparency in the market.
Read More

Your care

Latest Most read
Efficiency from inspection and supervision - a key factor for a transparent stock market

Efficiency from inspection and supervision - a key factor for a transparent stock market

VCN - Since the 2019 Securities Law officially took effect, the average annual number of penalty decisions has more than doubled compared to the period 2015-2020. This shows that the strictness of the law is being enforced effectively.
SBV approves designation of 14 important banks in 2024

SBV approves designation of 14 important banks in 2024

The State Bank of Vietnam (SBV) has issued Decision No. 538/QD-NHNN approving the group of credit institutions and foreign bank branches which play an important role in the country's banking system in 2024.
Central bank urges card issuers to review procedures

Central bank urges card issuers to review procedures

The State Bank of Vietnam (SBV) has issued a directive, demanding commercial banks to review their procedures in issuing and managing bank cards.
Warning about impersonating tax authorities to commit fraud during  tax finalization month

Warning about impersonating tax authorities to commit fraud during tax finalization month

VCN - The Tax industry has continuously provided information and issued warnings about impersonating tax officials and tax authorities to commit fraud against taxpayers, but there are still people who fall into the trap of these fraudsters, especially dur
“3 priorities, 3 breakthroughs” in task deployment of State Treasury

“3 priorities, 3 breakthroughs” in task deployment of State Treasury

To successfully implement the State Treasury Development Strategy as planned, Deputy Minister of Finance Bui Van Khang stated "3 priorities, 3 breakthroughs" " and 7 notes in task performance.
Mobile Version