Vietnam’s Flexible Monetary Policy Amid Global Changes

HANOI (Reuters) – Vietnam will maintain a flexible monetary policy aimed at controlling inflation. Authorities will monitor U.S. President-elect Donald Trump’s policies to adjust domestic strategies accordingly, as stated by the central bank on Tuesday.

Economic Context

Despite rising bad debt and difficulties in Vietnam’s bond and stock markets, the property sector is showing some signs of recovery, according to deputy central bank governor Dao Minh Tu during a regular press briefing.

Vietnam’s manufacturing-led economy grew by 7.09% last year to reach $476.3 billion, significantly outpacing the 5.05% growth of 2023. This growth was driven by strong exports and robust foreign investment inflows.

Challenges in Banking and Real Estate

However, economists have indicated that weaknesses remain in both banking and real estate sectors, with credit growth falling below target. Tu noted that non-performing loans are currently under control and that commercial banks are operating stably. Bank lending had increased 15.08% as of Dec. 31, with a central bank target of 16% credit growth for this year.

Addressing Troubled Banks

The central bank is addressing issues with troubled lender Saigon Joint Stock Commercial Bank (HM:VCB) (SCB) and stated that the takeover of two weak banks by private lenders would be finalized before the Lunar New Year. Previously, in October, the central bank announced plans for two more banks to be absorbed by larger institutions.

The State Bank of Vietnam orchestrated an unprecedented rescue of SCB last year amidst the country’s largest financial fraud. Reports indicated that the SBV infused $24 billion in “special loans” to avert its collapse.

Monitoring Global Policies

Pham Chi Quang, head of the central bank’s monetary policy department, emphasized the need to closely monitor the policies of the Trump administration. The United States remains a top destination for Vietnamese exports, and Trump has pledged to impose new tariffs on imports.

Quang mentioned that foreign exchange policy would continue to be flexible, adapting to global changes. He added, “We will continue to stabilize interest rates and the forex rate amid challenges in 2025. This task is difficult for the SBV, but we are confident we can manage the market.”

As of now, Vietnam’s dong is trading close to its lowest levels against the dollar.