The government has pursued a cautious but flexible monetary policy over the past three years against the background that the global economy was recovering slowly and domestic inflation soared to 13.29% in the first half of 2011, reports the Vietnam Government Portal.

The policy aims to stabilise macro-economy, control inflation, ensure the safety of the banking system, and maintain credit growth under 20 percent. Credits have been mainly steered to production.

Accordingly, by the end of 2011, total means of payment and credit grew 10 percent and 12 percent, respectively, and interest rates were regulated in accordance with macro-economic developments.

Enhanced supervision, inspection and strict handling of violations regarding deposit rates helped pull down lending rates, for example by 0.5-15 to 14.5 percent or even 13.5 percent for loans for agricultural production and exports.

The GDP expanded 5.89 percent while inflation was brought from 22 percent in October down to 20 percent in November and 18.13 percent in December of 2011.

From the start of 2012, the State Bank of Vietnam set the target to lower deposit rate to 9-10 percent/year. In May, the central bank began to impose interest rate cap on short-term loans for priority areas of agriculture, rural development, export-oriented production, support industries, small- and medium-size enterprises, and high-tech businesses.

By the end of that year, deposit rate decreased by 3-6 percent and lending rate fell by 5-9 percent against the previous year’s data. Total means of payment and credit respectively expanded around 20 percent and 9 percent, in line with the target of keeping inflation under 6.8 percent.

The above results pushed the central bank to continue with its monetary policy in favour of production and market.

Key interest rates have gradually been lowered to ease difficulties against businesses. Both deposit and lending rates were reduced to within the band of 2-5 percent, back to the levels of the 2005-2006 period.

This year, deposit rate has dropped to 7 percent and the cap on lending rate for five priority areas has fallen to 9 percent. In the first eight months, credit grew 6.45 percent in comparison to that at the start of the year, making it possible to realise the whole-year credit growth of 12 percent.

In short, interest rates decreased sharply since 2011 and credit growth became more stable over the period under review.-VNA