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Vietnam to keep on tightening monetary policy

Xinhua Financein HANOI
2018-10-08 13:37

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Vietnam's central bank will likely continue its tightened monetary policy in the fourth quarter of this year after its decision to strictly control lending to high risk sectors in the third quarter did not adversely affect the country's economic growth, according to local experts.

The State Bank of Vietnam, the central bank, wants to keep inflation below 4 percent this year, while also ensuring the exchange rate is stable, local daily newspaper Vietnam News on Monday quoted Ho Chi Minh City Securities Corporation as reporting.

The corporation's analysts said the main tool to achieve the targets is to actively restrict credit growth and the central bank will be confident to continue its policy at least until the end of 2018 as the tightened policy did not seem to have a negative impact on Vietnam's economic growth in the third quarter.

In contrast to some concerns that the central bank's regulations on requiring credit institutions to limit loans to high risk sectors such as real estate, securities and consumption in the third quarter of 2018 could slow down the gross domestic product (GDP) growth, GDP in the period still grew well, helping the indicator in the first three quarters expand 6.98 percent, the highest nine-month growth since 2011.

With the high growth, GDP will need to increase by only 6.1 percent in the last quarter to meet the top legislature's 6.7-percent GDP growth target set for 2018. Economists forecast the target is easily achievable as the annual growth rate of Vietnam's GDP in the fourth quarter averaged 6.87 percent over the past five years.

According to the corporation, this result will help reinforce the central bank's policy of tightening credit growth in the third quarter and it will likely continue the policy in the remaining months of this year. In fact, although the official growth target is set at 17 percent in 2018, the credit growth limit assigned to commercial banks was only 14 percent.

Total loans of Vietnam's banking system grew 8.5 percent in the first eight months, compared to 11.5 percent in the same period last year, according to the State Bank of Vietnam. Last year, the banking system posted credit growth of 18.17 percent, surpassing the target of 18 percent.
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