Active and flexible monetary policy regulation


On 21st May 2018,an additional report on the results of socio-economic development in 2017, early 2018 and the key tasks and solutions in the coming time was deliveredto the National Assembly byStanding Deputy Prime Minister Truong Hoa Binh, in which he emphasized: an active and flexible monetary policy would ensure the liquidity and safety of the financial system.

On behalf of the Government, Standing Deputy Prime Minister Truong Hoa Binh reported to the National Assembly

Standing Deputy Prime Minister Truong Hoa Binh stated that in early 2018, the macroeconomic situation was stable; the inflation was under control, the 4-month averageconsumer price index (CPI) increased by 2.8%; the core inflation rose by only 1.34%.

Particularly, the GDPgrowth in the first quarter this year reached 7.38%, the highest level over the last 10 years,in whichthe growths ofall 3 major sectorswere higher than the same period last year. Besides, exports continued to expand strongly; in the first months of 2018, many largeexport orders were signed. Totalexport value of the first 4 months hit73.76 billion US dollars, increasingby 19%, scoring a trade surplus of 3.4 billion US dollarswhich has made an important contribution to the improvement of the of paymentbalance.

Another positive point of the reportwasthat the business investment environment and administrative reform havemade significant advancements. The average Provincial Competitiveness Index (PCI) has reached the highest level since 2005. The improvedbusiness environment has stimulatedthe entrepreneurialspirit. In the first 4 months of 2018, there were over 41 thousand newly established enterprises and more than 11 thousand enterprises comeback into operation; the total newly registered capital stood atover 1.16 trillion dongs.

Regarding the monetary policy regulation, the Government's report citedthat the monetary policy wasactively and flexibly regulated, ensuring liquidity and safety of the financial system. The interest rates were stabilized; credit preference for production and priority sectors was offeredwithinterest rates being decreased by 0.5 - 1%.

Besides, the exchange rates and foreign exchange market were stable; the State’s foreign exchange reserves hit63.5 billion US dollars. Credit institutions strengthenedtheir financial capacity, expandedtheir network, developed their payment services,retail credit and consumption credit; thesolutions to control virtualcurrenciestrading have also beenimplemented…

Regarding the restructuring and handling of bad debts of credit institutions, the report claimed that the restructuring of credit institutions associated with the handling of bad debts in accordance with the Resolution of the National Assembly and the Law on amendments and supplements to some articles of the Law on Credit Institutions have achieved some important results. The weak commercial banks were strictly supervised and handled based on market principles. By the end of March2018, the bad debts ratio was 2.18% ...

However, besides the achievements, Deputy Prime Minister Truong HoaBinhrevealed that there were still many limitations, difficulties and challenges. Accordingly, the macroeconomic stability was not sustainable. Although the CPI has been rising in a modest manner, there were still potential risks of inflation due to many unsolved problems. Disbursement of investment capital from the state budget in the first 4 months only reached 16.4% of the plan; the financial discipline of the State budget hasnot strictly followed somewhere.

In addition, logistics and specialized examinationcostswere still high. Some important projects were behind schedule resulting in a substantial increase in costs. The planning and planning management wereineffective in some areas. The real estate market development was not sustainable. Public assets were loosely managedin many places, causing losses and wastes to the State budget; a number of serious law violations related to house and land managementwere detected and brought to criminal court…

Regarding the policy regulation in the coming time, according to Deputy Prime Minister Truong HoaBinh, the Government will continue to implement synchronously and efficiently monetary and fiscal policies, ensure the stability of the macro-economy, tamethe average CPIat around 4% and promote GDP growth to over 6.7%. The Government will also strive to ease the interest rates, especially for priority sectors, stabilize the foreign exchange market, increase the State's foreign exchange reserves, control credit volume at an appropriate level in association with credit quality,strictly supervisethehigh risksectors...

Concurrently, the Government will continue to effectively carry out the resolutions of the Party, National Assembly and Government on strategic breakthroughs and restructuring the economy in line with renovating the economic growth model. Besides, the Government will proactively prepare for and take advantageof the Industrial Revolution 4.0. Also,it will be necessary to review, finish and organize the synchronous implementation of schemes, plans and programs on the restructuring of industries and sectors; regularly evaluate, supervise and conduct the implementation attached with responsibilities of the leaders. The government determined to develop a national program onincreasingthe nationallabor productivity; promote the application of science and technology, enhance vocational training quality;strive for a contribution of Total Factor Productivity (TFP) in GDP growth up to over 46%, improve social welfares, increase the value and ranking of Vietnam for the international Human Development Index (HDI).

The report clarified the Government’s missions:"To promotethe implementation of the National Assembly's Resolution on the pilot implementation of bad debts settlement and the Law on amendments and supplementsto a number of articles of the Law on Credit Institutions. To strive forthe approval and accelerate the implementation of the restructuring plan for each credit institution. To focus on handling weak credit institutions and bad debts based on market principles, without directly usingState budget; intensify examination, inspection and supervision; strictly handle violations. To develop safe and sustainable stockand insurancemarkets".

Department of Research and International Cooperation