Vietnamese PM asks banking sector to cut interest rates to spur economic growth

Vietnamese Prime Minister Nguyen Xuan Phuc has called on all local banks to implement "reasonable" interest rate cuts in a bid to boost economic growth.

“Together with the rate cut, banks should expand credit, prioritizing loans for manufacturing and processing firms, SMEs and exporters,” Phuc said at a meeting on Tuesday.

Vietnamese companies still rely heavily on bank loans, experts said. Banks now offer annual lending interest rates of 6.8-11 percent to manufacturing enterprises and businesses.

According to the National Supervisory Commission, macroeconomic factors such as inflation and foreign exchange rates are expected to remain stable this year, making it possible for banks to cut interest rates. The government has set a target of keeping inflation below 4 percent in 2018.

Accelerated bad debt settlements and improved liquidity in the banking system are also expected to allow banks to cut rates, said the commission.

Bad debt in the banking sector was estimated at 9.5 percent last year, according to the commission, while credit expanded by an estimated 16.96 percent, according to the General Statistics Office.

The government expects the economy to expand 6.5-6.7 percent this year after GDP growth hit a 10-year high of 6.81 percent in 2017.