Vietnam’s central bank considers interest rates cut to support growth amid virus fears

Accordingly, the refinancing interest rate, the rediscounting interest rate, open market operation rate, overnight rate in the inter-bank electronic payments will be lowered.

Time and amount for the interest rates cut have not been decided, but it will be made soon and the reduction percentage is expected to be stronger than the previous time, said the vice governor.

With coronavirus, several central banks in the world have considered reducing interest rates to support their economies.

In early March, the US Federal Reserve cut interest rates by half 5 percentage points to 1-1.25% without waiting for the official meeting on March 17-18. The agency had a prompt action due to coronavirus that has been negatively affecting the US economy.

In Vietnam, in addition to interest rates cut, the central also plans to reduce payment fees for credit institutions and members participating in payment in the market, said Vice Governor Tu.

The regulator will reduce 50% of current fees of the National Credit Information Center. Payment fees provided by NAPAS will also be reduced soon.

In September 2019, Vietnam’s central bank lower interest rates by 25 basis points, the first time since 2017, to support the economy amid rising global risks from the escalating US – China trade tensions. The benchmark refinance rate was reduced to 6% from 6.25%.

From the beginning of this year to middle of March, outstanding loan growth in the economy was about 0.1%, lower than 0.85% of the same period last year.

However, outstanding debt affected by the Covid-19 epidemic was VND926 trillion ($40 billion), accounting for more than 11% of the total outstanding loans of the economy, said Nguyen Quoc Hung, Director of Credit Department under the State Bank of Vietnam.

In another move to support businesses, Ministry of Finance has proposed five-month tax payment delay for epidemic-hit enterprises.

Businesses directly affected by the coronavirus outbreak would be allowed to pay VAT and rent five months late, according to a Government's draft decree written by the Ministry of Finance.

The ministry said almost all sectors and and industries, especially small, medium-sized and micro enterprises, individuals, groups of individuals, production households have been affected by the epidemic.

The targeted beneficiaries may include those working in agriculture, forestry and fishery production, food processing, weaving, clothing production, shoe and footwear production, rubber production, manufacturing of electronic products, computers, manufacturing and assembling automobiles.

The extension may also be applicable to rail, road, waterway, aviation, warehousing, and other supporting activities for transportation, accommodation, catering and other activities of travel agencies, as well as tour and support services.

In addition, about VND3 trillion ($130.43 million) of VAT and personal income tax payable in 2020 by individuals, groups of individuals, and business households are proposed to be extended to December 15.

Earlier on March 3, the General Department of Taxation issued Document No. 897/TCT-QLN asking local departments of tax to extend tax payment deadlines in a bid to help ease enterprises' difficulties caused by the COVID-19 epidemic. 

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Source: VGP, SBV