Vietnam central bank seen to further cut policy interest rate this year

Accordingly, the organization expects another 50bps worth of cuts to the benchmark rates, which would take the refinancing rate to 4.0% and the discount rate to 2.5% by the end of 2020.

2020 economic growth is seen to decelerate to 2.8% from 7% in 2019 due to weak external demand from a world economy in recession to hamper a recovery in Vietnam’s large manufacturing industry, the organization said.

Vietnam is in the process of gradually reopening its economy with the easing of movement restrictions, following quick and stringent Covid-19 containment measures over the first four months of the year, in addition to growing reports of companies seeking to relocate their production from China to Vietnam.

The State Bank of Vietnam has recently cut its benchmark interest rates by 50bps. The refinancing rate was reduced to 4.5% from 5.0%, discount rate to 3.0% from 3.5%, and the overnight inter-bank lending rate to 5.5%, from 6.0% with effect from May 13.

Vietnam will continue to closely monitor developments in domestic and foreign markets to manage monetary policy for inflation control, stabilize the macro economy, and safe operations of the credit institution system, said Pham Thanh Ha, director general of the Monetary Policy Department under the central bank.

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