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Vietnam’s weekly financial - monetary update (Week 4 – 2021)

Vietnam’s weekly financial - monetary update (Week 4 – 2021)

Thursday 28, 01 2021

Vietnam’s macro-economic overview

On the financial market, the local currency deposit interest rate has been reduced by many commercial banks with a popular decrease of 0.05%-0.2% / year for all terms. According to the State Bank, the interest rate on domestic currency deposits is currently at 0.1-0.2% / year for demand deposits and less-than-1-month term deposits; at 3.2-3.9% / year for term deposits from 1 month to less than 6 months; 4.0-6.0% / year for term deposits from 6 months to less than 12 months. It can be said that the deposit interest rate for VND is currently the lowest level in the past 15 years.

Vietnam’s macro-economic overview

Meanwhile the lending interest rates in VND also decreased compared to the end of 2019. Currently, the maximum short-term lending interest rate in VND for some sectors is at 4.5% / year.

In the context that inflation remains low and the domestic economy still faces many difficulties due to the impact of the Covid-19 epidemic, monetary policy in 2021 will be loosened to support economic growth. Therefore, the interest rate level in the first months of 2021 is expected to be stable at a low level, equivalent to that at the end of 2020. However, it is forecasted that interest rates will increase slightly again in the second half of 2021 due to the acceleration of credit growth.

Weekly financial - monetary situation and forecasts

Exchange rate

In the past week, the USD / VND exchange rate increased on the official and unofficial markets. At VCB, compared to the previous week, the exchange rate of USD / VND increased by 5 VND / USD, to 22,955 VND / USD (buying side) and 23,165 VND / USD (selling side). Compared to the beginning of 2020, the USD / VND has decreased by 25 VND / USD.  

On the unofficial market, the USD / VND exchange rate increased by 120 VND / USD on the buying and selling side, to 23,480 VND / USD and 23,520 VND / USD, respectively.

Exchange Rate

At the State Bank of Vietnam, the USD / VND exchange rate was stable at 23,125 VND / USD, which is 713 VND / USD lower than the ceiling price. Compared to the previous week, the USD exchange rate on the selling side increased by 12 VND / USD to 23,788 VND / USD and was 50 VND / USD lower than the ceiling price.

Meanwhile, the central exchanged rate announced by the State Bank applicable to January 21, 2021 was 23,144 VND / USD, up 12 VND / USD compared to the rate announced the previous week. 

The US has recently informed that Vietnam is temporarily not subject to any trade sanctions after alleged currency manipulation.

On January 15, 2020, the Office of the US Trade Representative (USTR) released a statement on the results of an investigation under Article 301 of the Trade Act of 1974 regarding Vietnam's monetary valuation policy. In particular, US Trade Representative Robert E. Lighthizer said that there has not been any specific action regarding the conclusions in this investigation. However, the US will continue to evaluate existing options.

The Vietnamese Government has repeatedly affirmed that the exchange rate control over the past years is only aimed at controlling inflation, stabilizing the macro-economy, not creating an unfair competitive advantage in international trade.

Interest rates

Banks supported to lower interest rates, but did not loosen credit conditions. Accordingly, in order to enjoy preferential interest rates, customers must meet certain conditions. Despite implementing customer support programs, banks still have to take credit security as a prerequisite.

In 2020, credit institutions exempted and reduced interest rates for about 590,000 customers with outstanding loans of over VND 1 million billion. Currently many banks are also implementing many credit programs to support customers with low interest rates. According to the State Bank's statistics, the current maximum short-term lending interest rate in VND for some sectors is 4.5% / year; and that in USD is 3.0-6.0% / year.

Gold price

The world gold price has increased again because the dollar value was low, and the cash flow tended to pour into the gold market.
At the end of the week, spot gold price was 1,868.8 USD / oz. Gold futures price in March 2021 on Comex New York was 1,850 USD / oz. On the Kitco trading exchange, spot gold prices were at 1,871.30 - 1,872.30 USD / oz, down 74 USD / oz (equivalent to an increase of 1.3%) compared to the previous week.

Gold price
The domestic gold price tends to increase in line with the world gold price. In Hanoi, SJC gold price increased by 300,000 VND / tael (purchased) and 250,000 VND / tael (sold), to 56.05 - 56.62 million VND / tael.

Source: Ministry of Industry and Trade
Compiled by VietnamCredit

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