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VNDirect: Monetary tightening will only take place in the second half of 2022

16/05/2022

VNDirect believes that any monetary tightening will only take place in the second half of 2022 (more likely in the fourth quarter of 2022) and the increase (if any) will be limited, around 0.25-0.5 %.

In the latest macro report, VNDirect Securities JSC continues to expect the State Bank of Vietnam (SBV) to maintain accommodative monetary policy until at least the end of the second quarter of this year, for a number of reasons.

Firstly, although inflationary pressure is expected to increase in the coming months, the average consumer price index in the first half of 2022 is forecast at 2.5% YoY, still far below the Government's target of 4%.

In addition, domestic demand remains weak and has not fully recovered to pre-pandemic levels. Moreover, the State Bank still prioritizes the goal of maintaining low lending rates to support businesses and economy recovery.

VNDirect believes that any monetary tightening will only take place in the second half of 2022 (more likely in the fourth quarter of 2022) and the increase (if any) will be limited, around 0.25-0.5 %.

The company expects the State Bank to allow credit growth to remain high to support the recovery of the economy. Credit capital flows will be prioritized for the manufacturing and service sectors, especially priority sectors such as industry, import and export, agriculture, forestry and fishery.

In addition, the SBV will carefully control credit flows into high-risk areas such as real estate, securities and BOT (Build-Operate-Transfer) projects. The company maintains its view that credit growth will maintain a high 14% YoY in 2022.

Regarding lending interest rates, the State Bank is implementing an interest rate compensation package with the amount of VND 3,000 billion. This package offers a loan interest rate of only 3-4% p.a. for businesses strongly affected by the COVID-19 pandemic.

In addition, the Government plans to expand the size of the package of interest rate compensation for businesses to VND 40,000 billion, focusing on a number of priority subjects, including small and medium-sized enterprises, enterprises participating in a number of national key projects, and doing business in certain industries (tourism, aviation, transportation, etc.)

 

Kylie Nguyen

© 2019 Vietnam Bank for Agriculture and Rural Development No. 2 Lang Ha street, Ba Dinh district, Hanoi, Vietnam
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