Multi-target monetary policy and interest rate reduction requirements of the SBV
Bank interest rates are gradually decreasing but are considered too slow compared to the recovery
Speaking at the conference "Southern real estate embracing infrastructure development opportunities" organized by CafeLand, Dr. Nguyen Tri Hieu said that Vietnamese real estate has not yet seen "the light at the end of the tunnel".
Although the SBV's monetary policy is correct and timely, a sharp cut in interest rates is not a "magic wand". Exchange rate management and foreign exchange intervention must be extremely cautious.
In addition, Vietnam's economy is still dependent on major partners such as the US and China.
The Fed not raising interest rates is good for Vietnam.
Vietnam's GDP in the first 6 months of the year grew by 3.72%, very low compared to the growth target of 6.5% for the whole year. Although import-export activities recorded a trade surplus of 20 billion USD, according to experts, this is a "virtual trade surplus" because both export and import values decreased, in which imports decreased.
The domestic bond market froze after major crimes last year, and investors lost confidence in this market. The individual corporate bond trading system has come into operation, but there has been no excitement.
From the beginning of the year until now, the State Bank (SBV) has reduced operating interest rates four times, bringing deposit interest rates down to 3-4%, with many banks even reducing them more sharply. Lending interest rates have decreased by at least 2 percentage points since the beginning of the year but have not decreased enough to support the economy.
According to Dr. Nguyen Tri Hieu, Vietnam's economy is influenced by two major economies, including the US and China.
Among them, the two top concerns of the US today are tightening monetary policy to control inflation and global politics. The US has recently focused on the second issue through trade cooperation policies.
Therefore, Dr. Nguyen Tri Hieu said the US may raise interest rates to curb inflation.
This economic and financial expert pointed out that raising interest rates by the Fed will first affect the exchange rate. Currently, the exchange rate is about 24,300 VND/USD. If, in the coming days, the exchange rate increases to 24,500 VND/USD, the State Bank (SBV) may consider it, and if it continues to increase to 25,000 VND/USD, we will probably feel very insecure. An increase in exchange rate will be beneficial for exports but at the same time disadvantageous for imports.
Unlike the US - the country that controls the USD, or the European bloc, China has large foreign exchange reserves, and Vietnam has lower foreign exchange reserves, about 70-80 billion USD.
Foreign exchange reserves must be sufficient for at least three months of imports if a country cannot export. When foreign exchange reserves cannot intervene to pull down foreign currencies, the black market exchange rate will increase and increase economic risks.
At the same time, the stock market will be affected when the Fed raises interest rates because when the value of the USD is pushed up, and the value of the dong falls, foreign investors will tend to withdraw from the Vietnamese market to invest in other markets. Use USD.
There is no light at the end of the tunnel yet.
Regarding the banking and financial system, Dr. Nguyen Tri Hieu acknowledged that banks currently have much capital but seem to only "sleep peacefully" and "not eat well" because credit growth is very low.
He reiterated that in the first 8 months of this year, credit growth reached 5.3%, and from now until the end of the year, we must sprint to reach the target of 14%. Experts pointed out that banks cannot lend despite the principle that banks must push out capital to make a profit.
Experts explain that this comes from the increasing level of economic risk and the risk from borrowers.
In the manufacturing industry, a series of businesses went bankrupt. Many businesses had no orders, including domestic orders, so there was no need to increase capital.
For real estate businesses, in the past, banks were very open in lending, and at the stage of more credit control, this group of businesses can still mobilize capital easily from the bond channel.
In the current context, real estate values are falling sharply. In 2016, if real estate were valued at 100 VND, the bank would lend 70 VND. Up to now, the value of real estate has decreased from 100 VND to 50 VND; even if the bank recovers the assets, it is not enough to cover the outstanding debt.
Therefore, Dr. Nguyen Tri Hieu believes that if the State Bank continues to reduce interest rates, it will be a positive factor for businesses that need loans to maintain production and business activities.
Particularly for the real estate group, reducing interest rates is not a magic wand because this group's financial health and asset value have declined.
Mr. Hieu said that large projects such as Ring Road 3 and Long Thanh Airport would help make the situation more exciting.
Regain trust
According to Mr. Vo Huynh Tuan Kiet, Director of the Housing Marketing Department of CBRE Vietnam, the market faces huge challenges.
Vietnam's economy is experiencing many pressures and impacts on the real estate market. Some factors to keep in mind include supply decline. Experts say that this is a different context from previous crises.
Second is the imbalance in supply and demand. Recently, the real estate market has increased in price continuously, and mid-range and affordable products are almost gone. Meanwhile, demand is largely concentrated in this segment.
Third, the pressure to increase interest rates at times of more than 15% affects the psychology of buyers.
Fourth, legal problems have prevented 70% of projects from being implemented in the last 3 years. This causes the implementation life cycle of a project to lengthen, thereby pushing up investment costs and leading to higher selling prices. This is also a factor that greatly impacts the current market.
Finally, there is investor confidence. The Vietnamese market developed very quickly in the period 2015 - 2019, with a large number of investors. In particular, Vietnamese investors are very sensitive.
There is a project near the metro that increases the price by 150%
Experts say that belt roads and highways will push the trend of building centrifugal urban development in the southern region alone.
Currently, costs are high, and only a little land is left in the central area. This is an opportunity for Binh Duong, Long An, or suburban districts such as Binh Chanh and Cu Chi of Ho Chi Minh City. In addition, the Ring Road systems affect Ho Chi Minh City and Dong Nai, Binh Duong, and Long An areas, creating changes in the entire region.
This fact shows that the Metro system about to be implemented can change the orientation of infrastructure investment.
In the future, Ho Chi Minh City will develop urban projects associated with the transportation system, including metro lines.
In addition, the establishment of Thu Duc City is considered a very long-term orientation and cannot be implemented in a short time.
In addition, the current planning for allocating functional areas also faces many things that could be improved. Therefore, investors must also have a longer-term vision if investing in Thu Duc City.
