This is the judgment of Yuanta Securities in thematic report on assessing the impact of the interest rate cut by the State Bank of Vietnam (SBV).
Accordingly, this company said that the lowering of the regulating interest rate this time had a more positive impact on the banking system and might affect the economy more strongly than the rate cut for the 1st time in March. “A series of input interest rates for banks, especially the short-term deposit interest rates, which are sharply lower than the previous periods, will help banks reduce deposit costs significantly and support businesses to extend their debt and restructure loans. The liquidity of the banking system has been much more abundant”, the report acknowledged.
For businesses, Yuanta said that, in addition to extending and restructuring loans, reducing short-term lending rates by 0.5 percent might not really boost demand for credit from the business side.
“The low credit growth is not necessarily due to the lack of liquidity, but the key is still the question of whether the domestic and world pandemic situation is under control and does not come back, especially in the countries that have significant trade balance with Vietnam such as the US, EU, China and Japan.
Because if the investment demand is still weak, businesses will not borrow even if interest rates are low and banks will also be very careful in disbursement because of bad debt concerns,” the report explains.
However, the positive point is that Vietnam’s pandemic is now under control and the government will try to prevent the disease from coming again for the second time. In addition, boosting public investment in the last two quarters will help improve growth.
If in the last two years, the credit of other activities (including services) accounted for an increasing proportion (about 36.9%), this year the industry and construction is forecasted to grow compared to two years ago.
Yuanta Securities said that credit growth for the whole year of 2020 would be hard to reach the target of 14 percent set by SBV, which would only reach 9-10 percent if the public investment activities are well implemented.
