Monetary policy helped Vietnam's economic recovery, growth

The economic picture turned brighter in the fourth quarter of last year as businesses started their recovery efforts following the easing of restrictive measures.

After three rounds of interest rate cuts in 2020, the State Bank of Vietnam kept its rates unchanged in 2021 to facilitate credit institutions to access funds from the central bank with low costs and directed commercial banks to lower their lending rates in an appropriate manner.

As a result, overall loan rates dropped by an additional 0.77 percentage points following the reduction of 1 percentage point in 2020, according to a report in Vietnamese media outlet.

The exchange rates between the US dollar and the Vietnamese dong have remained stable, while many major currencies in the region fell sharply compared to the US dollar. Market liquidity was guaranteed and legal demand for foreign currency was met.

Based on the economic growth target of 6.5 per cent and inflation of 4 per cent for 2021, the State Bank set the credit growth target for the whole year at 12 per cent, with flexible adjustments in accordance with the actual situation.

Vietnam’s central bank also continued to instruct commercial banks to focus their lending on manufacturing and other priority sectors while restricting lending to risky sectors such as property and securities.

As of the end of November 2021, credit has grown by 10.77 per cent compared to the end of 2020.

Inflation is also rising, posing challenges to the State Bank of Vietnam’s regulation of monetary policy. Some international organisations have forecast that inflation in Vietnam in 2022 will be around 3.5-4 per cent and may even be higher depending on global commodity prices.

Fibre2Fashion News Desk (DS)