Vietnam's surprise rate cut may spur growth

Hanoi

VIETNAM'S surprise lowering of interest rates for the first time in three years may help to support economic growth, but raises credit risks in a nation still grappling with a hangover of bad debt.

The central bank reduced the refinance rate by 25 basis points to 6.25 per cent late on Friday and also lowered the discount rate to 4.25 per cent from 4.5 per cent. The changes come into effect on Monday, the State Bank of Vietnam said on its website.

"These rate cuts will make it cheaper for businesses and individuals to borrow, so it will help spur loan demand and bolster consumption," said Do Ngoc Quynh, head of treasury at the Bank for Investment & Development of Vietnam in Hanoi. "Vietnamese companies still highly rely on bank lending. We just need to be mindful about how the loa…