Vietnam cuts interest rates again as economic growth slows

The central bank, formally known as the State Bank of Vietnam (SBV), will also cut the overnight electronic interbank rate to 5.5% from 6.0%, while keeping the key discount rate at 3.5%, it said in a statement.

The Southeast Asian country is trying to avert a slowdown in growth from weak demand in its key markets, after first quarter gross domestic product (GDP) expansion slowed to 3.3% from 5.9% in the fourth quarter of last year.

Vietnam's exports in the first four months of this year fell 13.0% from a year earlier, while its imports plunged 17.7%. A sharp decline in imports could indicate a further slowdown ahead in industrial production, as businesses reduce their procurement of raw materials and equipment.

The fresh rate cuts are "aimed at lowering the interest rate levels to help businesses and households have better access to credit," the SBV said in the statement.

The central bank said inflation in Vietnam is under control while banks' liquidity is abundant, facilitating its move to cut the rates.

The central bank last cut its refinance rate to 5.5% from 6.0% on April 3, and its discount rate to 3.5% from 4.5% on March 15.

With the latest move, both the refinance rate and the overnight rate will have been cut twice since March.

Cutting the refinance rate lowers lenders' costs to obtain short-term loans from the central bank, thus supporting their lending to struggling firms.

Lower global demand for goods manufactured in Vietnam, regulatory reforms and a wide anti-corruption crackdown have contributed to tighter credit for firms, especially in the real estate sector.

The central bank earlier this month had hinted at the fresh rate cuts.

Vietnam targets economic growth of 6.5% this year, slower than an expansion of 8.02% last year.

Source: Reuters