HSBC Pencils Vietnam’s 2017 GDP Growth at 6.4%

CEO of HSBC Vietnam Pham Hong Hai has forecast interest rates in Vietnam to go up but ruled out a rate race.

Vietnam’s economy is projected to grow 6.4% this year, below the 6.7% growth target set by the government, VnExpress quoted Chief Executive Officer of HSBC Vietnam Pham Hong Hai as saying at a conference on the country’s economic outlook on Tuesday.

Inflation has returned since the start of this year and could reach 4% this year, compared to 2.7% in 2016, analysts of the UK bank said.

The dong is expected to continue depreciate, with the USD/VND rate seen reaching 23,200 toward the year-end, equivalent to a depreciation of 1.9% from end-2016.

Hai reckoned that interest rates of dong-denominated deposits will continue climbing as banks are striving to build up resources to meet Basel II requirements.

In a bid to attract depositors, a number of local banks have recently issued long-term certificates of deposit (CDs), offering rates of up to 9% per year, 80-100 basis points higher than the average level.

According to a new rule by the State Bank of Vietnam, effective in January 2017, the ratio of short-term capital used for medium- and long-term loans has been cut to 50% from 60% previously. This has prompted banks to increase long-term deposits, a central banker said.

The issuance of CDs is also aimed to improve the capital adequacy ratio (CAR) to meet Basel II standards.

“Interest rates will not fall back to previous lows, but will go up. However, I don’t believe banks will not join a race to push rates up to sky-high levels as happened before,” Hai noted.

The executive argued that the central bank will use its monetary tools to control the upward trend of interest rates. In addition, banks have become more cautious about lending as they have to meet a series of barriers set by the banking regulator.

Tuan Minh / BizLIVE