The State Bank of Vietnam will cut the refinancing rate to 7 percent from 8 percent effective May 13, Deputy Governor Nguyen Dong Tien said at a briefing in Hanoi today. The discount rate will be reduced to 5 percent from 6 percent, he said.
The rate cuts are the eighth since the start of 2012 and follow a reduction in March. Prime Minister Nguyen Tan Dung has approved a master plan to revamp the economy and set up a steering committee to restructure banks by 2015 after elevated bad-debt levels crimped consumption and slowed economic growth.
“This is a good move by the central bank, as it will help bring lending rates down to support businesses, and bolster the economy,” Alan Pham, chief economist at VinaCapital Group, said by phone from Ho Chi Minh City. Today’s decision “reflects what has already happened in the financial market, as some banks have moved ahead to cut interest rates recently.”
The dong was little changed at 20,940 per dollar as of 11 a.m. local time. The Ho Chi Minh City Stock Exchange’s VN Index climbed 0.5 percent.
Vietnam’s economy expanded 5.03 percent last year, the slowest pace since 1999. The slow restructuring of banks and state companies contributed to the International Monetary Fund’s decision to cut the nation’s growth forecasts for this year and next, Sanjay Kalra, the Hanoi-based resident representative, said in an interview on May 3.
Policy makers around the world have moved to counter currency appreciation and stimulate growth, with Sri Lanka cutting rates more than estimated today and the Bank of Korea unexpectedly lowering borrowing costs yesterday, following the lead of Australia, Europe and India this month.
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