Credit directed to prioritized areas, growth momentums

Monetary policy in the right direction

At the recent seminar “Flexible management of monetary policy and growth targets in the new context” held by the Government Portal, Phan Duc Hieu, standing member of the National Assembly's Economic Committee, commented that the shift of the Government’s monetary policy from a “tight and firm” to “more flexible and loosened” one is in the right direction. The goal is to promote growth, and solve the current situation of production and business stagnation.

The State needs to facilitate consumers’ and businesses’ access to capital - Photo: M.P

Hieu said the coordination between fiscal and monetary policies is very important; however, the more frequent use of which tool depends on each specific time. Despite the current context of production and business recovery, businesses are still facing difficulties in capital and cash flow. “Interest rates have been reduced by 1.5 to two percent to support businesses. The credit growth target has also been set at about 11 percent, which could help businesses and investors re-orient their activities,” said Hieu.

Dau Anh Tuan - Deputy Secretary General, Head of the Legal Department, Vietnam Confederation of Trade and Industry (VCCI) - said that the current solution, which is to prioritize the monetary policy in the direction of lowering interest rates and increasing the money supply to make it easier for businesses to borrow money, in his opinion, is a very successful and very necessary policy.

“If businesses cannot maintain operations and growth, it will definitely affect our country’s economic growth,” said Tuan.

Reducing interest rates not a skeleton key

As for monetary policy, Dr. Vo Tri Thanh - Director of the Institute for Research on Brand Development and Competition - said that the interest rate can be reduced from 1-1.5 percentage points from now until the end of the year. Monetary policy can be loosened, but in principle, governance cannot allow “easy money.”

Affirming that there is still room for loosened monetary policy and lower interest rates, however, Dr Vo Tri Thanh said interest rates are not an “almighty prescription,” but they need to be combined with other policies such as those on stimulating consumer demand, supporting workers, public investment, solving difficulties for export, and facilitating capital access for consumers and businesses.

Regarding the direction of credit capital in the coming time, Dr. Can Van Luc, chief economist of the BIDV, said that, first, credit must be provided to five prioritized areas, namely export, agriculture, high technology, small and medium-sized enterprises, and supporting industry. The second is to focus on the three growth drivers of the economy; and third is consumption.

Luc added three factors to strengthen confidence in the monetary policy: the money supply to the economy is now at a very low rate, 2.7 percent as of June 30, lower than the 3.8 percent of the same period last year. Next, cash conversion cycle in the first half this year is only 0.67 times, which is equivalent to the low cycle of 2022. Finally, the price level in both the world market and Vietnamese market this year is basically relatively stable.