b.

Vietnam’s interest rates movement forecast in 2021

In brief, during the period of 2017 - 2019, Vietnam's interest rates were in the range of
6% and 6.25%, contributing to the stable development of the market economy. However, the
world’s financial market in general and the Vietnamese’s in particular have been massively
affected by the pandemic – COVID-19 from the beginning of 2020, and obviously, Vietnam’s
financial market participants have to make a move to adapt to this unavoidable situation.

Figure __: The Vietnam’s lending interest rate movement forecast in 2021

Under the negatively impact of COVID-19, the State Bank of Vietnam has cited the fact
that many foreign governments have implemented economic stimulus strategies to avoid
recession, one of which is policy rate cuts made by central banks. In particular, the SBV lowered
the lending interest rate from 6% to 4% in 2020. With lower interest rates, businesses and
households can get access to cheaper loans than usual, creating opportunities for growth and
helping them recover quickly from the damage caused by COVID-19. In other words, the SBV is
creating a new path to support economic activities. According to Trading Economics global
macro models and analysts expectations, lending interest rate in Vietnam is expected to be 4% by
the end of this quarter and projected to trend around 4.25% in 2021.
 Figure __: The Vietnam’s deposit interest rate movement forecast in 2021

Refer to the General Statistics Office, compared to the end of 2019, deposits rose by
4.35%, almost double the rise in the same period. Commercial banks face an excessive amount
of liquidity. Therefore, several commercial banks have reported that they are going to reduce
deposit rates. Since the COVID-19 pandemic, this is the third time banks have simultaneously
shrunk their deposit interest rate; many banks have set their deposit at 3.9 - 4.05% for less than 6
months from the beginning of July 2020, and the maximum payout for deposits of 13 months is
7.8%. Moreover, deposit interest rate in Vietnam is expected to reach 4.48% by the end of 2020,
also is predicted to grow around 4.73% in 2021.

To conclude, due to the complicated and unpredictable movements of COVID-19,

Vietnam does not expect much in the near future on a positive change in interest rates section,
especially in 2021. With the negative losses arising from the pandemic, Vietnam's financial
economy will probably need a long time to recover.