Illustrative image (Source: VNA)
Hanoi (VNA) – The prospect of stable interest rate in 2017 is being supported by macro factors and policies such as reduced pressure in exchange rate and drastic measures in tackling bad debt, the National Financial Supervisory Commission said.

In its economic report for May and the five first months of 2017, the committee said if USD/VND exchange rate rises 1 percent, inflation will increase 0.17 percent, while noting that the VND/USD rate in commercial banks and the free market has shown a downward trend since early this year.

The US Federation Reserve (Fed)’s raising of short-term interest with small adjustments has yet to cause pressure on exchange rate, it commented.

However, in the remaining months of 2017, the exchange rate will be affected by high foreign currency demand due to rising trade deficit, the report said, forecasting that the country may see its trade balance change from a surplus in 2016 to a deficit of about 3.5 percent of total exports.

In the long term, the committee held that the Vietnam dong will be under pressure from the Fed’s road map of raising interest rate in the next years, along with unpredictable changes in the prices of Chinese renminbi and Japanese yen.

The report also made clear that measures to settle bad debt positively assist the reduction of interest rate. On May 16, the Government issued Decree 61/2017/ND-CP on the verification of bad debts’ initial price and mortgages, and the setting up of a council for bad debt auction. At the same time, a draft law on support for credit institutions’ restructuring and bad debt settlement is being finalized, and a decree on settlement of credit institutions’ bad debt may be approved on June 20 at the earliest.

The interest rates for all terms in the interbank market had gradually decreased to 4-4.2 percent as of May 22, down 0.8-1 percentage point compared to the levels at the end of April.-VNA