Trang Chủ
Expressing strong agreement with the main report of the Conference, SBV Governor Nguyen Thi Hong said that in 2022, our economy faces many difficulties and challenges and huge pressure from the uncertainty of the global and domestic economy; we had to not only overcome limitations and inadequacies from inside but also deal with unprecedented problems. However, with the close attention of the Party, the National Assembly, and the drastic direction of the Government; the participation of ministries, relevant agencies, central and local governments; with the companionship of businesses and people, our macro-economy was fairly stable. Vietnam is the only country in the Asia-Pacific region and one of the few countries in the world whose credit rating has been upgraded since the beginning of the year. This is a remarkable result in the context that high inflation and economic slowdown have been witnessed around the world and in the region.
Speaking about the tough situation and the difficulties for monetary policy management in 2022, the Governor stated that 2022 was a very challenging year for managing monetary policies when we faced pressure from the increase in inflation and interest rate and stronger U.S. dollar all over the world, and difficulties in the domestic stock market, real estate market and corporate bond market. Various problems arose, such as: (i) How to manage credit while promoting economic growth and ensure the safety and soundness of the system in the context that there was an alarming rise in a couple of monetary indicators such as the loan-to-deposit ratio and the credit-to-GDP ratio of Vietnam; (ii) How to stabilize the foreign exchange market in the context that Vietnam has high index of economic openness, domestic manufacturing relies heavily on imports, the U.S. dollar strongly encourages, Vietnam was on the USA’s monitoring list for currency manipulation, etc.; (iii) How to maintain the safety and soundness of the system in the context that the system's liquidity and public confidence was strongly affected by the unprecedented incident of the SCB.
Thanks to the proactive direction and monitoring of the Government and the Prime Minister and the synchronous implementation of various solutions and policies of the SBV, as of 2022, monetary policies significantly contributed to strengthening the macroeconomic foundation. primarily: contributing to controlling inflation at a low level (3.15% on average), recovering economic growth at a high level (8.02%); credit was estimated to increase by 14.5%; money and exchange foreign markets were stable (VND depreciated by 3.5%, interest rates increased by nearly 1% per annum, which was a much lower fluctuation rate than other countries in the world and in the region), the liquidity of the system remained good , etc. Especially last November, the U.S Department of the Treasury removed Vietnam from the advanced currency manipulation monitoring list, and at the same time, highly appreciated the SBV's monetary policy and exchange rate management.
Governor Nguyen Thi Hong also shared three lessons in monetary policy management in 2022.
First, in the context that our economy has a high level of openness, it is inevitable that the domestic economy and currency will be affected by global economic fluctuations. Hence, it is necessary to prepare for flexible responses to those fluctuations, thereby enhancing the independence and autonomy of the economy in the midst of economic integration.
Second, the SBV has always been consistent in its goal of monetary policy management to "contribute to controlling inflation, stabilize the macro-economy and support economic growth," but priority in each period will be determined based on the real situation. In fact, since the SCB incident, which had a strong impact on the liquidity of the system and the market, occurred in October, the SBV gave the highest priority and focused on implementing solutions to ensure the safety and soundness of the system and the stability of the forex market.
Third, as each policy has varied impacts on each sector of the economy, it is important to have courage and respond flexibly on the basis of closely monitoring the situation, considering the timing and appropriate usage of each tool and solution to resolve difficulties in order to achieve goals. This idea is illustrated by the management of interest rate, exchange rate, and credit policy in 2022 as follows:
The exchange rate management in 2022 was subject to the U.S.'s advanced monitoring, under the pressure of the stronger U.S. dollar, it will be difficult for the SBV to stabilize the market if the commitment was implemented. Therefore, the SBV actively negotiated with the U.S and reported to the Prime Minister to manage the exchange rate more flexibly. From October 2022, the increase in interest rate, the stronger U.S. dollar, and the SCB incident had a negative impact on market sentiment, expectations, and liquidity, resulting in the highest level of the increase of exchange rate, the market freeze, and the increase in hoarding foreign currency.
In this context, the SBV urgently implemented various solutions to focus on liquidity improvement. evolve, credit growth had not been adjusted in October. The SBV adjusted credit growth by 1.5 to 2% when the liquidity of the system had been improved, and external impacts had been eased. In order to stabilize the foreign exchange market, the SBV simultaneously implemented solutions such as: widening the trading band of the exchange rate from 3% to 5% to flexibly allow the VND to depreciate up to 9%, intervening by selling foreign currency when necessary , increasing operating interest rates by 1%, thereby gradually stabilizing the market. VND depreciated about 3.5% in 2022, which was much lower than other currencies around the world and in the region.
Regarding monetary policy management in 2023, Governor Nguyen Thi Hong affirmed that the global and domestic economy will still face a lot of difficulties in 2023. The head of the International Monetary Fund predicted that one-third of the global economy will be affected by a recession and also warned that the world will face more challenges in 2023. In Vietnam, core inflation tends to increase while solutions need to be implemented to support the economy, and difficulties in the stock market, real estate market, and corporate bond market have not been resolved yet.
Therefore, the SBV will: (i) Focus on finding solutions and the highest priority to ensure liquidity and maintain the safety and soundness of the banking system; (ii) Continue to manage monetary policy tools flexibly and synchronously, closely coordinate monetary policies with fiscal policies and other macroeconomic policies to contribute to controlling inflation, stabilizing the macro-economy, maintaining economic balances, and stabilizing the monetary and foreign exchange markets; (iii) Implement appropriate credit management, contributing to maintaining the recovery of the economy; directing credit flows to mainly on manufacturing and business and priority areas; continue to promote the implementation of tasks of the banking sector in the socio-economic recovery and development program and national target programs; (iv) Coordinate with ministries to propose solutions to resolve difficulties for the markets.
According to the Governor, monetary policies are short-term tools, so they should be restricted for medium and long-term problems. Monetary policies, apart from contributing to controlling inflation and stabilizing the macro-economy, are essential to ensure the safety and soundness of the system. Therefore, from the perspective of the overall economy, a balance needs to be promoted in implementing economic policies, and they should also coordinate with each other more synchronously. For example, to resolve economic difficulties and liquidity problems, it is necessary to promote public estate investment disbursement, reduce and extend taxes, adjust real prices, etc, to promote cash flows in various sectors of the economy. Consequences and risks may arise in the future due to heavy reliance on bank loans, as Vietnam's monetary and credit indicators have been at a warning threshold. In order to resolve difficulties for businesses and people, the banking sector needs to focus on implementing innovative solutions and simplifying the lending process to improve access to capital. However, for businesses that are not eligible for loans, it is necessary for the Government to implement other support solutions, such as loan guarantees and support policies for small and medium-sized enterprises, which need to be effectively implemented.
