VIETNAM’S central bank will cut its refinance rate by 50 basis points to 5 per cent from 5.5 per cent, effective from Thursday (May 25), the government said on Tuesday.

The State Bank of Vietnam (SBV) will also cut overnight electronic interbank rate to 5.5 per cent from 6.0 per cent. It will keep the key discount rate unchanged at 3.5 per cent, the government said in an online statement.

This is the SBV’s third round of rate cuts since mid-March, when it became one of the few central banks to buck the global monetary-tightening cycle in a bid to support growth.

Vietnam is trying to avert a slowdown in growth arising from weak demand in its key markets, after first-quarter gross domestic product (GDP) expansion slowed to 3.3 per cent from 5.9 per cent in the fourth quarter last year.

“The measure aims at allowing commercial banks to lower lending rates, therefore supporting the economy and accelerating growth,” the government said.

The central bank last cut its refinance rate to 5.5 per cent from 6 per cent on Apr 3, and its discount rate to 3.5 per cent from 4.5 per cent on Mar 15.

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Cutting the refinance rate lowers lenders’ costs when obtaining short-term loans from the central bank, thus supporting their lending operations to struggling firms.

Lower global demand for goods manufactured in Vietnam, regulatory reforms, and a wide anti-corruption crackdown have contributed to tighter credit for firms, especially in the real estate sector.

The central bank earlier this month had hinted at the fresh rate cuts. REUTERS