VietNamNet Bridge – In its latest report about the macro economy, the National Finance Supervision Council highlighted the heat in the interbank market, where the trading value reached the highest peak so far this year.

The October report by the national council shows a picture of the stable monetary and foreign currency market. The agency believes that the credit institutions’ risks have been eased with the improved liquidity, powered by the sharp increase in bank deposits.

The lending interest rates and the interbank interest rates have decreased to the low equal to that in 2006.

By October 2013, the deposit interest rates had decreased by 2-3 percent, while the lending interest rates by 3-5 percent in comparison with earlier this year.

The interbank interest rates have been hovering around 3-4 percent per annum for short term loans. By September 20, foreign currency outstanding loans had decreased considerably by 13.65 percent in comparison with 2012.

However, the authors of the report have noted some noteworthy happenings in mid October. The trading value in the interbank market has been high at VND21.228 trillion a day from early October to October 18, the highest level so far this month.

The short term loans (less than 1 month) accounted for 90 percent of the total trading value, the highest level since May. On October 24, the overnight interest rate jumped to 4.71 percent, an increase of 1.7 percent over that in early October.

However, the finance supervision council does not think this is a problem. Experts believe that these were just “temporary changes” since people believe the loan demand would increase sharply in the last months of the year.

The lending had grown by 6.82 percent by the end of September, which means that banks need to obtain the credit growth rate of 1.7 percent a month to fulfill the yearly plan.

The State Bank of Vietnam believes that the 12 percent credit growth rate target set up by the National Assembly would be attainable. However, economists and bankers keep pessimistic about the plan.

Dr. Tran Du Lich, a member of the National Advisory Council for Monetary Policies believes the outstanding loans won’t be as high as 12 percent due to the bad health of businesses – the borrowers.

Le Quang Trung, Deputy General Director of VIB Bank, thinks the credit growth rate would be only 9 percent this year.

The foreign exchange market, in the eye of the National Finance Supervision Council, has been stable with just some minor changes.

It believes that the dong/dollar exchange rate would be stabilized thanks to the profuse supply, from the foreign direct investment (FDI) disbursement, official development assistance (ODA) and overseas remittance by overseas Vietnamese. The sources are believed to bring $25 billion in foreign currencies this year.

The viewpoint of the national finance supervision council proves to be similar with the comments by ANZ Bank some days ago. The bank believes that there is no pressure on the government of Vietnam to adjust the exchange rate until the end of the year.

In a longer term, ANZ has predicted that the dollar price would increase to VND21,500 per dollar by mid-2014. Vietnam’s foreign currency reserves, as estimated by ANZ, are $32 billion.

Chi Mai