Low inflation bolsters further interest cuts

Monday, Aug 04, 2014 15:55

Except fỏ January with Tet holidays, inflation rates have always been below 5 per cent this year. — Photo 24h.com.vn
HA NOI (Biz Hub) ─ Inflation remaining low will create conditions for further interest rate cuts, VnEconomy online reported, citing the National Finance Supervisory Council's economic report for the first seven months of 2014.

Except for January with Tet (Lunar New Year) holidays, inflation rates have always been below 5 per cent this year.

The council forecast that inflation will remain stable over the coming months, and if the prices of basic goods don't see significant fluctuation, there's a high possibility that inflation will finish at approximately 5 per cent by year-end.

In the banking sector, both deposit and lending interest rates have eased.

In July, the annual deposit rates in dong averaged 5.53 per cent per year, down 0.6 percentage points over last December. The average lending rate was 10.08 per cent per year, decreasing 0.25 percentage points over the end of last year.

"With inflation anticipated to remain stable, there will be a basis for interest rates to be lowered more to support production and business activities," the report said.

According to the supervisory council, private investments reached 10.3 per cent of the nation's gross domestic product (GDP) in the first half of this year, lower than the 11.1 per cent level recorded in the same period last year.

Foreign direct investment capital disbursed in the first seven months posted a year-on-year increase of 2.3 per cent, while the figure for the same period last year was 6.4 per cent.

The council attributed the low investment levels to slow credit growth.

Lending expanded 3.52 per cent in the first six months of this year, compared with 4.7 per cent in the same period last year. Foreign currency loans rose by 12.3 per cent and dong loans increased 2.17 per cent.

Credit grew slowly because businesses still faced significant obstacles, especially in reducing costs and selling products, the council said. ─ VNS

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