VINACHEM

According to a recent report by the Hong Kong – Shanghai Banking Corporation, the SBV’s lowering interest rates led to an economic slowdown from 5.9 percent in 2011 to 4 percent in the first quarter of 2012 and, as a result, there would be less price pressure during 2012.

Lower consumer demand

For over a decade, economic growth rate has always been the primary target of the Vietnamese Government.

Statistics showed that in the 2003-2010 period, credit growth was maintained at a high level of about 30 percent per year. But since the beginning of 2011, the Government’s efforts to curb inflation has kept credit growth at 10.9 percent in 2011, much lower than its set target of 20 percent.

To cope with high interest rates, both businesses and people have cut down on their demand for credit and goods. Not a few businesses having difficulties in liquidity reduced their production scale.

Judging from low credit growth in the first two months of 2012, the national economy will not be able to achieve high growth rate as before.

A strict policy and measures have had a serious impact on the economy, especially in the agricultural, service, real estate, and construction sectors, as there was a fall in consumer demand.

With domestic demand dropping than expected, how to achieve a 5.7 percent growth rate in 2012 remains an open question.

However, experts said they were not concerned about the growth rate of 4.1 percent in Q1 as it used to be low at the beginning of the year.

Lowering interest rates - a must

Thanks to the SBV’s recent decision to lower interest rate by 1 percent as from early March, inflation is expected to hit a single-digit number with interest rates charged in the Open Market Operations dropping to 10 percent by the end of the year.

This move, however, is said to have eased pressure on the economy as low domestic demand will help slow down import growth and reduce the trade deficit.

HSBC experts also predicted that the national economy would be rather stable in 2012. They said the Government’s efforts to keep deposit rates at 13 percent and loan rates at 18 percent and maintain slow credit growth in the first quarter were paying off.