Hanoi (VNA) – The US Federal Reserve (Fed)’s latest interest rate hike will have little impact on Vietnam’s economy, according to experts.

Fed raised the benchmark overnight lending rate by 0.25 percentage point to a range of 4.75-5% on March 22, its 9th hike in 14 months.

According to economist Can Van Luc, the Fed's move had been forecast by regulators and investors, so it will not affect Vietnam’s economy significantly.

The problem is that the sentiment and reaction of investors and depositors in the US and globally in the coming days may still be affected, leaving a certain impact on the Vietnamese financial market.

Economist Phan Dung Khanh, head of the Investment Advisory at Maybank Investment Bank agreed, saying Fed's interest rate hike was foreseeable. He also said that the State Bank of Vietnam (SBV) devised a plan in advance and took action to lower interest rates and inject money into the market.

Regarding the stock market, some sessions will be affected by the Fed's move, he said. It is forecast 2023 will still be a difficult year for the stock market, however, he expects that positive growth will be recorded in the second half of 2023.

Given major central banks in the world raising interest rates, the SBV has just reduced a series of operating interest rates.

SBV Deputy Governor Dao Minh Tu said that although there are many difficulties due to the financial and interest rate policies of countries, including the US, Vietnam’s economy still shows positive signals in controlling inflation, adding that the Government is carrying out policies in a concerted, drastically and effective manner.

The SBV finds that it is necessary to reduce some operating interest rates, aiming to encourage commercial banks to reduce lending rates for businesses, thereby, lowering loan costs and creating conditions for businesses to overcome difficulties and quickly recover.

ඣ Over the past time, banks have strived to cut operating costs to have more resources to lower lending interest rates to support enterprises, he said.

As SBV trims the operating interest rate, banks can continue to reduce lending interest rates in the near future, he added.

Exchange rate support in 2023

In spite of high inflation in the US, along with the interest rate hikes of the Fed and other major central banks and the Fed's quantitative tightening programme, experts expect Vietnam's Consumer Price Index (CPI) this year to increase between 3 2% and 4.5% - meeting the Government's target of 4.5%.

The liquidity of the banking system will remain at the current level to support the Vietnamese dong. However, due to the low demand for loans and the abundant source of US dollar pouring into Vietnam which support the exchange rate as well as the liquidity of the banking system, interbank interest rates are likely to be kept low in the near future, they said.

The SBV is predicted to try to maintain the current operating policy with a reasonable operating interest rates to support economic development, according to experts. However, in the worst case - inflation continues to remain high in the US - the SBV can gradually increase the operating interest rates, especially the refinancing rate by 0.5%-1% for 2023 to ensure a stable exchange rate.
 

ACB Securities Company (ACBS)’s experts believe that the pressure on the Vietnamese dong to depreciate will be low this year because the weakening of the US dollar has made the Vietnamese dong strong. This tendency will continue in the future as the Fed is expected to slow down the rate hike in 2023 and possibly stop raising interest rates in the second half of this year.

FDI disbursement is expected to continue to grow strongly as Vietnam remains a low-cost producer and has stable macroeconomics and competitive labour costs in the region. This can attract FDI enterprises to invest and set up manufacturing factories, bringing more US dollars to Vietnam.

꧑ The strong recovery of the service industry, especially from international tourism, is also a factor that supports foreign capital flows./.