Monetary Policy 2024: Will Land Successfully

There are less than 3 months left until the end of 2024, a year full of storms in world politics and economics. However, with what has been achieved at this time, it can be boldly predicted that Vietnam will still achieve its growth target this year, and the role of monetary policy (CSTT) is a significant contributor to this success.

The dilemma of monetary policy

After the Covid-19 pandemic, we can hope for a recovery from 2023 with GDP growth reaching 5.05%, even though it did not reach the set target, and one of the highlights of success is that the 2023 monetary policy has brought the interest rate level to a comfortable level for businesses.

This is not only the effort and endeavor of banks, because to have the short phrase "low interest rate level" comes with difficulties in operating monetary policy. If you want to lend at low interest rates, the mobilization interest rate must also be low, but if the deposit interest rate is low, money will not go into banks but into other more profitable channels.

Resolving this contradiction is not simple, especially when entering 2024, the world economic and political context has many unpredictable fluctuations. The US Federal Reserve (FED) still maintains high interest rates, and only lowered them slightly (0.5% on September 18). That said, in the trend of tightening monetary policy in the world, the State Bank of Vietnam still maintains reasonable interest rates to stimulate credit, which is a very remarkable achievement in many aspects.

Deputy Governor of the State Bank of Vietnam Pham Thanh Ha expressed confidence in the monetary policy's goal of controlling inflation and supporting economic growth this year.

The reason for talking about many aspects is because, in addition to the international aspect when the FED is determined to keep interest rates high for a long time, some export markets have decreased demand, export costs have increased when transportation is difficult due to war in some places... domestic issues are also very difficult to deal with. As everyone knows, if credit wants to grow, institutional bottlenecks in the economy need to be untied. If they are not untied quickly and promptly, even if businesses can borrow capital from banks, it will be difficult to use it effectively.

In fact, these bottlenecks have been mentioned in many forums and by influential people. These are the shortcomings of the Law on Public Investment, the Law on Bidding, the Law on Management and Investment of State Capital in Enterprises, the Law on State Budget... Stuck in the mechanism, enterprises are blocked in output, so not everyone is enthusiastic about credit. Because what is the point of borrowing when the work is not running yet!

This reality not only puts banks in a bind, but also puts the State Bank of Vietnam in a difficult position because if it lowers interest rates further, it is unlikely to boost credit growth while facing risks from exchange rate pressure.

flourish

However, according to the latest results, the situation is now favorable for macroeconomic management. Last week, State Bank Governor Nguyen Thi Hong said that although the USD index has increased compared to the beginning of the year, the pressure has eased, thereby facilitating export growth. According to Ms. Hong, due to banks actively promoting credit, by September 30, 2024, credit had increased by 9% compared to the end of 2023, and by 16% compared to the same period last year. Therefore, the growth target of 15% this year is very likely to be achieved in the remaining months.

There are many reasons for these achievements, but one of the most prominent ones is the monetary policy. The average lending interest rate continued to decrease by about 0.5%, and the Vietnamese Dong depreciated by about 1.66%, a rate that many experts consider reasonable to stabilize the monetary market.

The reason why we have to talk in detail about how much the Vietnamese Dong has depreciated is because in the recent past, there have been times when the exchange rate story has become quite tense. If the State Bank does not handle tools such as interbank interest rates, OMO, etc. smoothly and skillfully, it will be very difficult to maintain a reasonable exchange rate, especially in the context of constant pressure from the interest rate difference between the Vietnamese Dong and the USD.

Finally, the persistence but flexibility in management solutions have yielded positive results, now in general the macro indicators of the economy are very bright, and the expectation of a credit growth target of 15% for the whole year of 2024 can be said to be within reach. Currently, some banks have increased deposit interest rates, and as Deputy Governor of the State Bank Pham Thanh Ha said, this is a good thing because banks have spent money!

Perhaps, for policy makers, nothing brings more confidence than the smooth flow of money. Banks spending money means businesses borrowing capital to operate effectively, and operating effectively means paying taxes regularly and workers having stable jobs... all these factors are linked together to create momentum for overall economic growth.

The biggest goal of monetary policy is to stabilize the macro economy and control inflation. Of course, it is still a bit early to confirm the success for the whole year 2024 at this time, but even so, with the results that have been measured and separated by numbers, it is not an exaggeration to say that this year there will be many remarkable results from the efforts of the State Bank.

Source: https://thoidai.com.vn/chinh-sach-tien-te-nam-2024-se-cap-ben-thanh-cong-206060.html