Credit growth in Vietnam is expected to accelerate towards year-end amid deposit rate cap reduction, but the expansion rate will be modest at 10 percent this year and the next, according to HSBC.
The country's central bank announced that it will cut the VND deposit rate to 5.5 percent from 6.0 percent effective Wednesday. The USD deposit interest rate will also be cut to 0.75 percent from 1 percent, effective Wednesday.
It is hoping that the reduction of the deposit cap will spur spending and cause banks to lower lending rates, HSBC said in a press release issued Tuesday.
The central bank announced that year-to-date credit growth was 7.95 percent as of Oct. 24 versus end of 2013. October inflation slowed to 3.2 percent year-on-year from 3.6 percent in September.
GDP is expected to gradually accelerate thanks to strong export performance, but still remain below trend. Inflation, too, will likely be manageable as oil prices are subdued and supply of food is ample.
Low domestic demand and limited depreciation of the currency also help temper inflationary pressures. Given the subdued appetite for consumption, HSBC said it does not expect the reduction of the deposit cap to spur spending significantly.
Vietnam has targeted credit growth of 12-14 percent this year.
After growing 5.42 per cent in 2013, Vietnam's economy has been expanding faster this year, with the third quarter's annual growth quickening to 6.19 per cent, from 5.42 per cent in the second quarter and 5.09 per cent in the first three months, government data show.