* Central bank lowers caps on 5 key rates
* First rate-cuts in nine months
* C. bank says rate cuts may boost growth, lending
* Vietnam needs broad structural reforms - economists
(Recasts, add details, quotes, analysis)
By Nguyen Phuong Linh
HANOI, March 17 Vietnam's central bank has cut a
series of key interest rates in a bid to boost the pace of
economic expansion at a time inflation has been low.
The State Bank of Vietnam (SBV) said on Monday it is
lowering the refinance rate, at which it lends the Vietnamese
dong to banks, to 6.5 percent from 7 percent, and
reducing the discount rate to 4.5 percent from 5.0 percent.
The central bank is also cutting the ceiling on interest
that banks can offer on dong deposits to 6.0 percent per year
from 7.0 percent, which has been the maximum since June.
The new rates take effect on Tuesday.
Monday's monetary policy moves follow similar ones last year
to help stabilise the currency and control inflation. Still,
most economists say Vietnam has not allowed anywhere near the
level of liberalisation and reform that's needed to let the
country reach its growth potential.
The ceiling on dollar deposit rates will be cut to 1.0
percent from 1.25 percent. Ceilings on dong loans extended to
businesses dealing with agriculture, exports and to small- and
medium-sized firms are being lowered to 8 percent from 9
The SBV indicated that lower inflation levels gave it room
for the changes.
"The first quarter's consumer price index could rise 1.5
percent from the end of 2013, much lower than the first quarter
of many previous years," Nguyen Thi Hong, director of the
central bank's monetary policy department, told reporters.
In parts of 2011, the annual inflation rate topped 20
percent. In 2013, it was 6.6 percent, the lowest in a decade,
and Hong said the pace should again be below 7 percent this
SBV Deputy Governor Nguyen Dong Tien said lowering the
ceiling on deposit rates would help banks lend at lower rates.
The central bank has projected an annual credit growth of
12-14 percent, after loans rose 12.51 percent in 2013.
Lower interest rates could help Vietnam meet the
government's this year's economic growth target of 5.8 percent.
The pace in 2013 was 5.4 percent, and the previous year saw 5.25
percent, the slowest growth since 1999.
The fresh rate cuts are "a very rational move from the SBV
as the current interest rates are too high while economic growth
is in a lower patch compared to last decade," said Le Anh Tuan,
chief economist at Ho Chi Minh City-based fund Dragon Capital.
However, Tuan said it would be tough for the rate cuts to
lift corporate borrowing demand, as many companies have stopped
operations, partly due to a lack of access to credit.
ANZ, in a report on Monday, said the rate reduction will
provide "limited support to credit growth" but noted that
Vietnam's high levels of non-performing loans (NPLs) continue to
be a drag on the economy.
HSBC said on Monday that Vietnam was among several regional
economies that should "not just focus on policies that tighten
the screws and wheel in growth in the short term".
It said Vietnam needed to restructure its state-run firms
and make a level playing field for all investors, while
recapitalising the banking system, boosting regulation and
supervision and tackling NPLs.
"Returning the banking system to health is critical," HSBC
said in a report.
(Writing by Ho Binh Minh; Editing by Martin Petty and Richard