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Vietnam central bank to cut policy rates from Thursday to spur growth

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09/30/2020 | 05:46am EDT
FILE PHOTO: Vietnam's State Bank building is seen in Hanoi

The State Bank of Vietnam (SBV) will cut its key policy rates from Thursday to boost economic growth that is now picking up pace, after the global impacts of the coronavirus saw it expand at its slowest rate in decades in the second quarter.

With fewer than 1,100 coronavirus infections and 35 deaths, Vietnam successful containment of new outbreaks has seen it resume economic activities sooner than many countries.

The refinancing rate will be cut to 4.0% from 4.5% and the discount rate to 2.5% from 3.0% the central bank said in a statement on Wednesday.

The rate cuts, the second time in just over four months, are in line with the government's measures to "help firms and people overcome difficulties and cope with the COVID-19," the central bank said in the statement.

The Southeast Asian country's gross domestic product growth in the third quarter likely accelerated to 2.62% year-on-year, up from an expansion of 0.39% in the second quarter.

The SBV said it would also cut the overnight electronic interbank rate to 5.0% from 5.5% and lower caps on the interest rates of dong-denominated deposits by up to 0.5 percentage points, depending on the maturities.

The government said earlier this month it expected economic growth of 2.0%-2.5% for this year.

In a note on Tuesday, Oxford Economics said the economy was still on track to record 2.0 to 2.25% real growth this year before accelerating to about 8% growth in 2021.

"The rise in electronics output bodes well for exports, at least in the short term," it said, noting that September exports rose 18% from the same month last year. "Retail sales momentum also trended higher."

By Khanh Vu


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