The market research company Market Intello forecast that the average interest rate this year would reduce by 0.5 percentage points compared with 2016.

In the “Vietnam Macroeconomic Report - May 2017” released this week, Market Intello expected the short-term deposit rates to drop to 4.5 per cent for the three-month term and 6.3 per cent for the 12-month term due to inflation management measures of the State Bank of Viet Nam and the Government.

The research company also anticipated that exchange rates would increase by between 1 per cent and 1.5 per cent as the US Federal Reserve’s plans to raise rates twice in June and September may put pressure on the exchange rate.

In addition, the trade deficit may make the demand for US dollars rise much more than in 2016, it said, adding however, that the Vietnamese dong will not be depressed because of the ability to control inflation below 4 per cent and abundant foreign reserves of the State Bank of Viet Nam.

Under the report, Market Intello also maintain its forecast for Viet Nam’s economic growth at 6.1 per cent in 2017.

“Agriculture is expected to recover slightly but the decline in the mining industry will impact the economic growth considerably,” it said.

Market Intello cut the CPI forecast to around 3.8 per cent, explaining that raising electricity prices could push up inflation in the third quarter, but weak domestic demand will hold inflation under the inflation target.

According to Market Intello, boosting investment from the domestic economic sector should be the biggest challenge in improving Viet Nam’s economy for the rest of the year.

“The Government has taken actions to accelerate capital disbursement from the State budget and improve the business environment for the private sector. However, until April 2017, the rate of capital disbursement from the budget was slower than the target rate,” it said. — VNS