Macro Update - Public investment surges on Government’s efforts
  • 2023-06-07T00:00:00
  • Macroeconomics

We expect another 50-bp reduction in the deposit rate cap over the remainder of 2023F. We previously forecast that international and domestic market conditions would improve in 2024F, allowing the State Bank of Vietnam (SBV) to lower the deposit rate cap to 5.0%. However, domestic inflation has been lower than expected while the USD/VND has been relatively stable, enabling the SBV to recently cut policy rates in order to boost economic growth. Moreover, we still anticipate a further 50-bp reduction in the deposit rate cap by the SBV over the remainder of 2023F due to (i) weak credit demand from both the retail and corporate sectors; (ii) the recent indication from the SBV to reduce interest rates to support the economy; (iii) and the expectation for the Fed’s monetary tightening cycle to near its end, which would not exert much pressure on the USD/VND exchange rate. We also expect the SBV will keep this deposit cap (1mo - <6mo) at 4.5% in 2024F.

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