Highest credit growth since 2023

Outstanding credit balance of the whole system as of June 30 reached 17.2 million billion VND, an increase of 9.9% compared to the end of 2024.

Vietnamese Dong depreciates despite weak USD

On the morning of July 8, at the press conference of the State Bank, Mr. Pham Chi Quang, Director of the Monetary Policy Department (State Bank) shared about the developments in the USD/VND exchange rate.

Mr. Quang said that while the USD Index (a measure of the strength of the USD compared to other major currencies) has decreased by about 10% since the beginning of 2024, the Vietnamese Dong (VND) has still depreciated by 2.7-2.8% against the USD.

Explaining the reason, according to Mr. Quang, to maintain the strength of a currency, that currency must be attractive. And interest rates are an important factor in maintaining the strength of a currency. In the past, implementing the Government's direction on reducing lending interest rates to ensure economic growth, the State Bank directed credit institutions to reduce costs and reduce lending interest rates. Accordingly, lending interest rates decreased by 0.6% compared to the end of 2024.

“Recent times have witnessed a series of continuous reductions in lending interest rates,” Mr. Pham Chi Quang emphasized.

Mr. Pham Chi Quang, Director of Monetary Policy Department (State Bank)

However, lowering interest rates also comes with trade-offs. Accordingly, when VND interest rates are low, the domestic currency becomes less attractive in the eyes of investors, especially in the context of the USD offering higher yields. This causes many financial institutions to tend to hold USD. Along with that, the overall balance of payments is still in a good surplus, but foreign capital flows have fluctuated strongly and have been withdrawn from the stock market since 2024.

Referring to the exchange rate and interest rate developments in the last 6 months of the year, Mr. Quang said that this morning (Vietnam time), the administration of US President Donald Trump announced a reciprocal tax rate of 25 - 40% with 14 countries. Mr. Quang said that with this tax rate, the global supply chain and FDI capital flows will be greatly affected.

According to Mr. Quang, Vietnam's economy has great openness, a very large export market, especially exports to the US, so the US government 's tax policy will greatly affect exchange rates and interest rates in the coming time when capital flows shift between countries.

In addition, Mr. Quang said that the policy of the US Federal Reserve is also worth paying attention to. Accordingly, the Fed has delayed reducing interest rates twice, due to the tax policy of the Trump administration. Although inflation in European countries and Japan tends to decrease, inflation in the US is very unstable. Meanwhile, the US Central Bank's interest rate management policy is based on data, especially employment data. While this data has many unknowns.

Director Quang said that with the unpredictable fluctuations of the FED's interest rate reduction policy, this will be a factor that greatly affects the movement of interest rates and exchange rates in Vietnam.

Since the beginning of the year, the Vietnamese dong has lost nearly 3% of its value against the USD.

Outstanding credit balance of the entire economy exceeds 17 million billion VND

Speaking further about interest rates and exchange rates, Deputy Governor Pham Thanh Ha emphasized that in the first months of 2025, the global economy has slowed down, affected by many factors, from rapidly changing tariff policies to increasing geopolitical tensions. The US's announcement of a 25-40% tax rate on 14 countries effective from August 1, and its warning of increased tariffs if these countries retaliate, shows that the global economy will remain uncertain in the coming period.

The Deputy Governor said that the State Bank always closely monitors developments in the domestic and international macro economy, financial and monetary markets to develop appropriate management scenarios; and proactively and flexibly manage monetary policy.

Regarding interest rate management, in the first 6 months of 2025, the State Bank will continue to maintain the operating interest rates to create conditions for credit institutions to access capital from the State Bank at low costs, thereby creating conditions to support the economy.

“The lending interest rate continues to trend downward. The average lending interest rate for new transactions of commercial banks is only over 6.2%,” said Mr. Ha.

Deputy Governor Pham Thanh Ha chaired the press conference on the morning of July 8.

Regarding exchange rates, during periods when the market is under great pressure, the State Bank is ready to sell foreign currency intervention to credit institutions when necessary to support market liquidity and serve necessary foreign currency needs. Thereby contributing to stabilizing the foreign currency market, contributing to stabilizing the macro economy, proactively creating room for exchange rates.

“The foreign exchange market operates stably, liquidity is smooth, foreign currency demand is fully met. Exchange rates are flexibly managed”

Regarding credit management, the total outstanding credit balance of the whole system as of June 30 reached VND 17.2 million billion, up 9.9% compared to the end of 2024. Compared to the same period in 2024, credit increased by nearly 19.4%. This is the highest growth rate since 2023.

Regarding the gold market, Deputy Governor Pham Thanh Ha said that in the first months of the year, the world gold price fluctuated continuously and broke records, accordingly, the domestic gold price moved in the same direction as the world. Thanks to synchronous solutions, the difference between the domestic gold price and the world gold price was basically controlled within a suitable range, about 5 million VND/tael.

Providing more information about the progress of amending Decree 24 on gold market management, Mr. Dao Xuan Tuan, Director of the Foreign Exchange Management Department, said that the State Bank has collected opinions on amending this Decree and will soon synthesize opinions and submit them for appraisal by the Ministry of Justice.

"The State Bank has widely solicited opinions on mass media. In the coming time, we will soon synthesize and submit to the Ministry of Justice for appraisal and submit to the Government. We will try to meet the deadline of July 15 as requested by the Prime Minister," said Mr. Tuan.

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Source: https://baolaocai.vn/tin-dung-tang-truong-cao-nhat-tu-2023-post648236.html