The Government expects lending to continue to pick up in the fourth quarter to fulfill the 12-per-cent annual target for credit growth. — Photo vinacorp.vn

HA NOI (Biz Hub) ― In a report issued late last week, ANZ Bank called for the State Bank of Viet Nam to keep its benchmark refinancing rate on hold at 7 per cent through 2014, despite a persistent weakness in domestic demand.

The central bank lowered the rate from 9 per cent to 8 per cent in March, and to 7 per cent in May, to assist struggling businesses and support market growth.

Although interest rates have been cut by a cumulative 800 basis points since 2012, over a quarter of loans are still priced at over 13 per cent per year, according to ANZ.

The Government expects lending to continue to pick up in the fourth quarter to fulfill the 12-per-cent annual target for credit growth, after overall credit increased 6.45 per cent in the first eight months, compared to 5.3 per cent recorded in July.

The bank also said it was cautious of Viet Nam's foreign debt obligations.

A recent joint report by the Ministry of Planning and Investment and the United Nations Development Programme estimated the ratio of Government-issued to Government-guaranteed bonds of two-five year tenors stood at 88.7 per cent. It also mentioned that both foreign and public debt have rapidly increased over the last decade.

"Despite the lack of of timely data, we will continue to monitor developments in Viet Nam's debt management and its effect on economic growth," ANZ said.

The bank said data dump for September, including muted retail sales and a foreign trade deficit, revealed that the trend of sluggish activity amid easing inflation pressure had continued.

Foreign direct investment (FDI) continued to lend support to the sluggish economy, however, with investment values increasing 34 per cent this year to August for a total of about US$7.4 billion. ― VNS