KB Securities Company has just released a report on macroeconomics in 2020, in which the monetary policy will continue to be loosened.
Specifically, the analysis team assessed that money and credit growth would be equivalent to 2019, at 13% and 14%, respectively. The estimated increase in the money supply in 2020 is about over 1 million billion dong, corresponding to the growth of about 13%.
The trend of promoting money supply into the system (on average about 1 million billion dong / year) has been maintained since 2016 in parallel with buying foreign currencies to supplement foreign exchange reserves. In 2019, foreign currency buying activities helped regulate the foreign exchange market, reducing the pressure of VND appreciation, especially in the context that most other central banks tend to loosen monetary policy.
In 2020, the SBV will likely continue to buy foreign reserves at about US $ 10 - 12 billion because the room for expansion through GDP scale in 2020 is expected to increase by about 25% (according to the new calculation method).
Also, the government's demand for debt repayment in 2020 is estimated at VND 242 trillion, an increase of 25% compared to 2019, so the pressure of issuing government bonds is relatively large. The adjustment of GDP will create conditions for the Government to expand its debt. Credit growth in 2020 is forecast at 14%, equivalent to the Government's target, to ensure both macroeconomic safety and growth stimulation.
Notably, Vietnam's credit / GDP index after adjusting GDP is about 110% (compared to the previous 130%, which has received many warnings from financial institutions in the world). Although it is not a healthy level, it partly reduces the pressure on the SBV's credit growth schedule. In 2020, the credit growth room of each bank will continue under the designation of the SBV with great advantages for commercial banks that have reached Basel 2 standards.
In terms of deposit and lending rates in 2020, the downward trend will be throughout the year. Specifically, the impact of the adjustment of operating interest rates during September - October and November 2019 will be gradually reflected in the first half of 2020. Besides, there is plenty of room for the SBV to continue cutting interest rates in 2020 when the real interest rates (excluding inflation) remain relatively high in the region. In the context that if inflation is well controlled, the State Bank will likely reduce the operating interest rate by 25 basis points in the second quarter of 2020 to stimulate growth.
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