On the basis of macro economic and monetary movements, from the beginning of 2017, the State Bank of Vietnam (SBV) continued to manage the monetary policy in a proactive and flexible manner in combination with fiscal and other macroeconomic policies in order to control inflation in accordance with the targets set by the National Assembly (NA), stabilize macro-economy, support economic growth at the appropriate level, while ensuring the liquidity of credit institutions and the economy, and stabilizing money market; The total liquidity is targeted to increase by about 16-18 %.
- Results of monetary policy management: the SBV managed synchronously and proactively monetary policy instruments in order to control money supply targets in accordance with the management objectives. By September 20, 2017, the total liquidity (M2) increased by 9.59% as compared to the end of 2016 (rose by YoY of 15.36%), thereby supporting to curb inflation at low level, ensuring to control CPI in the context that prices of several state-managed goods were adjusted. Liquidity of credit institutions was ensured, surplus was at the reasonable level to support credit growth at the beginning of the year, thereby contributing to stabilizing the mobilizing interest rates, lowering lending interest rates, concurrently supporting Ministry of Finance to issue Government bonds with long-terms and low interest rates.
- Interest rate movements: The interest rates were commonly kept stable and decreased despite of the increasing pressure in the six first months of 2017; from July 10, 2017, in order to decrease the operational expenses of enterprises, contributing to enhancing economic growth under Government’s orientation, on the basis of prudently assess that the inflation movements has the slight increasing trend and capacity of controlling the target of 4% set by the NA, and the banking operation has achieved positive performance, the SBV reduced by 0.5% p.a for maximum short-term loans applied for priority fields, depreciated by 0.25% p.a on all the managed interest rates of the SBV, issuing documents to direct credit institutions to continue proactively implementing measures to save costs, improving operational efficiency to facilitate the reduction of lending interest rates for priority fields.
As a result of the synchronous implementation of the above solutions, credit institutions have actively carried out Government’s and the SBV policies reduced the short-term lending interest rate by 0.5% p.a for priority fields. In addition, credit institutions also positively decreased the interest rates for business and production by around 0.5-1% p.a, depreciated the mid-term and long-term lending interest rates for priority fields to 8% p.a (from 9-10.5% p.a previously), implemented diversified packages of short, mid and long terms with preferential interest rates for necessary sectors in economic development and social security; The lending rate for short-term loans was 4-5% p.a, applicable to those customers who have good loan-repayment track records, as well as transparent finances.
Concurrently, credit institutions continued saving expenses to reduce lending interest rates, supporting enterprises under the direction of the Prime Minister and the SBV. Currently, the average of lending interest rates for priority fields were 6-6.5% p.a for short-term loans, 8-10.5%p.a for mid and long term loans; The rates for production and business were commonly 6.8% - 9.0% p.a for short-terms, and 9.3% – 11.0% p.a for medium- and long-term ordinary loans.
- Exchange rate results: The central rate continued to be managed in a flexible manner in accordance with market movements and monetary policy targets; proactively collaborating with proper liquidity adjustment of VND, closely monitoring movement of market liquidity and forex status of the system to adjust the appropriate central rate at the right time, thereby contributing to stabilize the foreign exchange market and rate in line with the set targets. Foreign currency liquidity is improved, the legal demand of individuals and organizations were met promptly and adequately. The SBV bought foreign currencies from credit institutions to raise the state international reserves; the exchange rates were relatively stable in comparison with the end of 2016.
- On credit: Based on the orientation of credit growth for the whole year, SBV has announced the targets for credit institutions and considered adjustments in line with the performance of credit institutions; directed CIs to focus on credit disbursements in production fields, prioritized industries, and tight control of credit for potentially high risk areas. SBV also instructed credit institutions to concentrate resources, balance capital sources to strongly implement preferential credit programs for some priority sectors, especially in rural areas, high-tech agriculture...
Credit to the economy has been increasing since the beginning of 2017 and steadily moving up over the months. As of September 20th, 2017, credit increased by 11.02% as compared to the end of 2016 - a high growth as compared to recent years (such as 10.46% increased for the same period in 2016 and 10.78% for the same period in 2015). The credit structure focused mainly on production and business areas, in which credit for some key economic sectors and prioritized sectors was growing higher than the overall growth rate of the whole system.
Lending to all priority sectors increased as compared to the end of 2016. Specifically, as of August 2017, credit for agriculture and rural development reached VND 1,222,267 billion, up by 17% as compared to the end of 2016, accounting for about 20.2% of total outstanding loans of the economy; Credit for the four remaining prioritized sectors (by the end of August 2017): Credit for export reached VND 207,001 billion, up by 8.14%; Credit for high tech enterprises reached VND 35,012 billion, up by 25.12%; Credit for Industrial development were VND 153,837 billion, increased by 18.9%; Credit for small and medium enterprises reached VND 1,292,182 billion, up by 7.49%;
- Restructuring in the first nine months of 2017 continued to be strengthened and implemented thoroughly and comprehensively by SBV, which focuses on 02 contents including: (1) to formulate and implement the National Assembly Resolution on piloting Non-Performing Loan and the Scheme on "Restructuring the system of CIs associated with NPL Resolution for 2016-2020 period"; (2) to restructure weak CIs.
Since the issuance of Resolution No.42/2017/QH14, the Vietnam Asset Management Company (VAMC) has resolutely carried out many measures to implement the contents of NPL Resolution. Debt purchase by special bonds: From January 1st, 2017 to September 15th, 2017, VAMC has purchased debts of 14 credit institutions with the total outstanding loans in the balance sheet of VND 20,995 billion, the purchasing price of debt was VND 20,619 billion, has met the target of 2017 assigned by the State Bank of Vietnam. Thus, from 2013 to September 15th, 2017, VAMC purchased 26,108 debts from 16,197 customers at 42 credit institutions, with the total outstanding balance of VND 296,550 billion, the purchasing price of debt was VND 266,543 billion.
- In payment activities: The share of cash on total liquidity in the economy tended to decrease, from 19.02% in 2005 to 14.02% in 2010 and to 11.49% as of December 31st, 2016; The perceptions and habits of using cash in payment have changed positively in the direction that more and more people choose non-cash payment instead of cash payment.
Vietnam's current payment infrastructure has basically met and promoted non-cash payment and payment via card.
Bank cards continue to grow; the number of cards issued, as well as the number and value of card transactions continue to grow steadily. As of June 2017, the number of issued cards reached 121.5 million cards. Commercial banks have integrated many features of payment application of bank cards using payment of electricity, water, telecommunications fees, insurance, transportation fees, and online payment. Commercial banks are always interested in improving the quality of card services, focusing on increasing the security aspects of bank cards.
At the moment, there are over 76 payment service providers implementing Internet payment services and 39 providers providing payment services via mobile phones. The State Bank of Vietnam (SBV) has directed the growth of card payment via POS to increase the value and the volume of POS transactions, contributing to the promotion of retail trade.
2. Orientations for the last months of 2017
In the last months of 2017, the SBV continues to conduct consistent measures related to monetary and banking operations to curb inflation, ensure macro-economic stability and support economic growth. SBV will focus on implementing following key measures:
- Closely monitoring developments of macro-economy, money market, inflation, operations of the system of credit institutions, the SBV will flexibly manage the volume of money supply, be ready to support liquidity for credit institutions, consider to adjust roadmap of applying the ratio of short-term capital resources to long-term, medium-term and short-term loans to ensure safe and sound banking operations and reduce pressure on liquidity, support credit institutions to stabilize the common mobilizing interest rate for lowering lending interest rates.
- Continuing to conduct measures to stabilize the common interest rate, decrease lending interest rates in line with macro-economic developments, inflation and money market in order to support economic growth in compliance with the Government’s directions. Continuing to direct credit institutions to proactively balance capital resources and utilize capital to ensure liquidity; implement measures of saving operational costs and improving business efficiency to lower lending interest rate for priority fields, business and production.
- Continuing to manage exchange rate in a flexible manner on the basis of the developments of inter-bank forex market, international market, macro-economic balance, total payment balance and in accordance with the objectives of monetary policy;
- Managing monetary policy in close collaboration with fiscal policy, flexibly regulating monetary instruments in order to stabilize money market, ensure systematic liquidity, supply capital effectively for the economy, curb inflation and support economic growth.
- Conducting measures and orienting regulation of credit growth in stick to the Prime Minister’s directions in Notice No. 372/TB-VPCP dated August 17, 2017, on the basis of inflation controlling, macro-economic developments and banking operations in order to concentrate credit on business and productions, priority fields; limit credit extension to risky fields. Continuing to closely coordinate with relevant ministries and agencies to tackle difficulties and implement credit programs (providing loans to encourage high-tech agriculture development, eco-agriculture; credit to agriculture and rural areas in line with Decree No. 55/NĐ-CP; providing loans for supporting fishermen to build larger boat in accordance with Decree No. 67/2014/NĐ-CP; providing loans for housing support in line with Decree No. 100/2015/NĐ-CP, and etc).
- Several orientations and measures of restructuring the system of credit institutions in the coming time: (i) Completing legal framework, mechanism, and policies on monetary and banking operations, of which focusing on completing legal framework for resolving and restructuring weak commercial banks; (ii) Improving financial capability, business model transferring, governance and management of credit institutions; (iii) Enhancing reform of banking supervision and inspection to improve its efficiency in line with practical requirements in Vietnam and international practices and standards; (iv) other supporting measures, including the establishment of Steering Board for restructuring credit institutions, which is headed by the Prime Minister and include one senior deputy head as Deputy Prime Minister, one deputy head as the SBV Governor and members as representatives of relevant ministries and agencies. Currently, the Prime Minister issued Decision on establishing the Steering Board with the mentioned-above members. In implementing tasks of the SBV as a deputy head of the Steering Board, the SBV Governor signed Decision on establishing the SBV Steering Board for restructuring credit institutions in coordination with NPL resolution.
- To improve service quality and technology of payment activities, especially card payment, the SBV should conduct several measures in the coming time as follows: Firstly, completing legal framework and mechanism to develop non-cash payment in general and card payment in particular, and meet requirements of IT application to payment and international integration; Secondly, continuing to building, developing and completing infrastructure and modern technology for payment; Thirdly, improving quality and diversifying banking services and utilities for better serve customers, applying multi-functional cards, QR code and Tokenization; Fourthly, enhancing inspection, ensuring securities for electronic payment system and card payment; monitoring electronic payment system in principle of international supervision, ensuring prudent payment system; Fifthly, strengthening the task of information and communication, training and consumer protection in electronic and card payment; Sixthly, enhancing coordination mechanism to develop electronic and card payment and etc.
VA-LH-LT