Vietnam central bank says to keep policy supportive, open to rate cuts

5:06 am Thursday, October 17th, 2024

By Khanh Vu

HANOI (Reuters) – Vietnam can still meet its economic growth target this year despite the extensive damage caused by Typhoon Yagi and is open to the possibility of interest rate cuts, central bank deputy governor Dao Minh Tu said on Thursday.

Tu also told a media briefing that business and manufacturing activities were recovering from the typhoon.

“The central bank will continue to pursue supportive monetary policies during the rest of the year,” Tu said.

“We will keep policy rates at least at the current levels, and are open to the possibility of further rate cuts.”

The central bank, formally known as the State Bank of Vietnam (SBV), reported that bank lending had risen 9% as of Sept. 30 from end-2023.

Vietnam’s economic growth largely relies on bank lending, and the central bank is targeting credit growth of 15% this year.

Vietnam’s gross domestic product (GDP) rose 7.4% in the third quarter from a year earlier, the strongest pace in two years, as growth in exports, industrial production and foreign investment offset the initial effects of typhoon-related flooding and damage in September.

Average consumer prices in the first nine months of this year rose 3.88% from a year earlier, below the government’s targeted inflation cap of 4.5% for the year.

At Thursday’s meeting, the central bank also announced that the country’s biggest bank, Vietcombank, will take over smaller lender Construction Bank and one of the leading commercial banks, Military Commercial Joint Stock Bank (MBBank), will take over Oceanbank.

The moves are part of the central bank’s restructuring programme to stabilise the financial sector and tackle non-performing loans, one of the largest banking consolidation operations in the country recently.

A central bank official at the briefing also highlighted a rising trend of non performing loans.

“The goal of the compulsory takeovers is for the banks to return to normal operations, handle their accumulated losses, … and ensure depositors’ rights,” said Nguyen Duc Long, deputy head of the central bank’s inspection department.

Under the restructuring plan, two other poorly performing commercial banks, DongA Bank and Global Petro Bank are still pending a restructuring plan.

(Reporting by Khanh Vu; Editing by John Mair and Daren Butler)