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VDSC: The State Bank will not raise the operating interest rate in 2023

According to Viet Rong Securities (VDSC), the State Bank of Vietnam (SBV) will not raise its operating interest rate in 2023 as part of its orientation to keep interest rates low to support economic growth.


VDSC stated that the exchange rate pressure that caused an increase in the operating interest rate in 2022 has cooled, providing a basis for the SBV to keep the operating interest rate unchanged in 2023.


VDSC added that the operating interest rate will not follow the market interest rate and will instead be kept low to ensure the safety of the system, especially in the context of increasing debt problems in 2023.


Experts predict that residential deposits will recover in 2023 due to an increase in deposit rates, the deflation of the speculative land bubble, a cooling of the gold investment channel, and a decrease in the attractiveness of the USD and the asset market (bonds, stocks) as investors rebalance their profit/risk expectations.

Source: VDSC


Commercial bank deposit interest rates are expected to continue to be differentiated due to competition among private joint stock commercial banks to solve liquidity problems, as well as the SBV's guidance on limiting the increase in deposit interest rates at state-owned joint stock commercial banks and competing to attract deposits in the context of idle cash flow.


Viet Rong Securities (VDSC) has stated in its 2023 investment strategy report that the State Bank of Vietnam (SBV) will not raise its operating interest rate in 2023 as part of its orientation to keep interest rates low to support economic growth. VDSC explained that the exchange rate pressure that caused an increase in the operating interest rate in 2022 has cooled, providing a basis for the SBV to keep the operating interest rate unchanged in 2023.


VDSC added that the operating interest rate will not follow the market interest rate and will instead be kept low to ensure the safety of the system, especially in the context of increasing debt problems in 2023. Experts predict that residential deposits will recover in 2023 due to an increase in deposit rates, the deflation of the speculative land bubble, a cooling of the gold investment channel, and a decrease in the attractiveness of the USD and the asset market (bonds, stocks) as investors rebalance their profit/risk expectations.


Commercial bank deposit interest rates are expected to continue to be differentiated due to competition among private joint stock commercial banks to solve liquidity problems, as well as the SBV's guidance on limiting the increase in deposit interest rates at state-owned joint stock commercial banks and competing to attract deposits in the context of idle cash flow.


As of early December 2022, the average deposit interest rate has increased by 2-2.5 percentage points compared to the end of 2021 and 0.6-1.2 percentage points higher than before the COVID-19 pandemic. The highest increase was seen in the 6-month and 9-month tenors at private joint stock commercial banks. Currently, the popular lending interest rate level in the economy is also approaching the interest rate of 2013.


The State Bank of Vietnam (SBV) may need to compromise on some long-term safety and stability goals in order to address short-term issues.


According to VDSC, Vietnam's monetary policy has multiple targets, with some targets being parallel (exchange rate and inflation) and others conflicting (exchange rate and interest rate). In 2022, the priority of monetary policy was to keep the exchange rate from rising due to pressure from the Federal Reserve's fast and strong tightening of monetary policy and to curb inflation. From Q4 2022, the priority will shift to ensuring liquidity for the system and controlling the deposit interest rate race.


In 2023, the expert group believes that the priority of monetary policy will shift towards controlling interest rate increases in the economy to support economic growth while ensuring the stability of the system (supporting liquidity, avoiding breakdown and loss of confidence in the banking system). To achieve these goals, the SBV may have to trade off some long-term safety and stability goals to solve short-term problems. The inflation target for 2023 has been eased to 4.5% and will be shared by fiscal policy, while the exchange rate is expected to be less pressured.


In addition, VDSC expects the open market to be the main liquidity support channel in 2023, with the SBV potentially hoarding USD after a period of sharp decline and injecting money through buying foreign currencies. Credit lines will continue to be used as a tool to direct credit into the economy and will be allocated according to the situation of credit supply and demand. Credit growth in 2023 is forecast at 11-12%, lower than the estimated growth for the whole of 2022 at 14%.


(Enterprise and Business)




(Quarterly) FS Data set of 30 commercial banks in Vietnam


(Yearly) FS Data set of 30 commercial banks in Vietnam


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