HANOI - Vietnam on Monday cut its key interest rates for the sixth time in 2012 in an attempt to boost an economy growing at the weakest pace in more than a decade.
The move comes as the communist-run economy struggles in the face of domestic banking sector turmoil, falling foreign direct investment and deepening financial troubles among state-owned companies.
The State Bank of Vietnam cut the refinancing rate – charged on loans to commercial banks – to nine percent from 10 percent. The decision, announced over the weekend, took effect on Monday.
The discount rate was lowered to seven percent from eight percent.
“Business and production activities are encountering difficulties due to markets’ weak purchasing power and large stockpiles,” the bank said in a statement.
Vietnam expects economic growth of just 5.2 percent for 2012 – the slowest rate in 13 years.
At the same time inflation hit a six-month high of 7.08 percent in November year-on-year.
“The rate decision aims to help businesses overcome difficulties in obtaining loans,” said a manager at a major Hanoi bank who did not want to be named.
Firms in Vietnam did not perform well this year, leading to difficulties in the banking system as well, she told AFP.
But “the situation won’t improve so easily in the short run", she added.
Vietnam launched a string of interest rate hikes in 2011 to prevent the economy from overheating and rein in double-digit inflation, but with growth slowing the authorities this year resumed monetary stimulus efforts.