The State Bank of Vietnam would consider cutting policy interest rates by 0.5 percentage points in the second quarter, bringing refinancing interest rates to 4% and discount interest rates to 2.5%. VNDirect also forecasts that the average 12-month deposit interest rate will remain at a low level of 4.5-5% p.a. in 2024.

The assessment was stated by VNDirect Securities in the newly released 2024 strategic report. The experts believe that the State Bank of Vietnam will maintain loose monetary policy to support economic recovery.

"The State Bank does not have much room left to further reduce deposit interest rates in the context of recovering credit demand, leading to increased capital mobilization needs of commercial banks; the difference between the average 12-month deposit interest rate and CPI has narrowed significantly.

However, deposit interest rates will remain at the bottom level throughout 2024 as the SBV aims to maintain a low interest rate environment to support economic recovery. The State Bank will consider cutting operating interest rates by another 0.5 percentage points in the second quarter, bringing refinancing interest rates to 4% and discount interest rates to 2.5%," VNDirect's report mentioned.

VNDirect also forecasts that the average 12-month deposit interest rate will remain at a low level of 4.5-5%/year in 2024. The average lending interest rate is expected to decrease by another 0.5-1 percentage point in 2024 thanks to low capital mobilization costs of commercial banks.

In the report, the USD/VND exchange rate is forecast to be less volatile in 2024 and VND may increase in value compared to USD in the range of 1-2% when there are many factors supporting VND in 2024.

First, the Fed may cut operating interest rates 3 times in 2024, so the DXY index is forecast to fall below the 100 point threshold in 2024.

Second, Vietnam is estimated to reach a record high trade surplus and balance of payments in 2023 and these balances will remain high in 2024.

In addition, VNDirect also expects the picture of attracting FDI capital and remittances to be positive in 2024.

Kylie Nguyen