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Vietnam CB Cuts Refinance Rate by 50 bps to Support Growth

  • Move reflects uncertain global outlook, weaker GDP growth
  • Vietnam cut several policy rates on March 14
  • SBV prioritizing controlling inflation
  • Slump in overseas orders impacting manufacturers

HANOI, March 31 (Reuters) - Vietnam's central bank said on Friday it will cut its refinance rate by 50 basis points effective April 3, bucking the regional trend as it maintains its focus on supporting economic growth amid global uncertainty.

The move brings the refinance rate to 5.5%, while the discount rate will remain unchanged at 3.5%, the State Bank of Vietnam (SBV) said.

It follows the central bank's surprise decision earlier this month to cut several policy rates - its first policy easing since late 2020 after a series of interest rate increases.

"In order to extricate the obstacles for the economy, businesses and citizens, the SBV decided a further cut on the policy rate," it said in a statement late on Friday.

Vietnam's economic growth slowed to 3.32% in the first quarter from 5.92% in the fourth quarter of 2022.

The decision reflected an uncertain global outlook, with inflation in several countries high and Vietnam's economic growth lower than had been anticipated, the SBV said, adding that domestic inflation was under control.

The announcement came just hours after a senior central bank official said the U.S. Federal Reserve's move to slow its rate hikes meant Vietnam would consider further rate cuts in future.

Vietnam, a regional manufacturing powerhouse, has targeted growth of 6.5% this year, but has been struggling as global demand slows for its key exports, which include textiles, footwear and electronic goods, such as smartphones.

The central bank also said it would lower from Monday the ceilings for interest rates on dong-denominated deposits by 0.5 percentage points to between 0.5% and 6.0% depending on maturities effective Monday.

It will also lower the caps on short-term dong-denominated loans to 4.5% to 5.5% from a range of 5.0% to 6.0% for certain economic sectors.

The overnight electronic interbank rate will remain at 6.0%, it said.

The central bank earlier on Friday pledged to keep monetary policy flexible for the rest of the year to support economic stability amid external challenges.

It said its priority was keeping inflation in check and ensuring the stability of the banking sector and support for businesses.

It was confident the country can keep inflation below the 4.5% target this year, after the consumer price index in February edged down from the previous month.

Deputy central bank governor Dao Minh Tu earlier told a news conference that protecting the banking system was important and some businesses had been struggling to get loans and needed support, including manufacturers suffering from a slump in orders.

Reporting by Khanh Vu and Phuong Nguyen; Writing by Martin Petty; Editing by Tomasz Janowski

Source: Reuters

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