The government's 2% interest rate support package creates motivation for the service and manufacturing sectors

DNHN - The Government published Decree No. 31/2022/ND-CP on State Budget Support for Interest Rates on Loans to Businesses, Cooperatives, and Business Households on May 20, 2018. The State Bank of Vietnam outlines the interest rate assistance plan of commercial banks, ensuring that it does not exceed a total of 40,000 billion VND and is approved by the Ministry of Planning and Investment and the Ministry of Finance to primarily support the service and manufacturing sectors.

In particular, at the request of the Governor of the State Bank of Vietnam, the Government issued Decree 31/2022/ND-CP on interest rate support from the state budget for loans to companies, communes, and business households. According to Resolution No. 43/2022/QH15 of the National Assembly dated January 11, 2022, and Resolution No. 11/NQ-CP of the Government on January 30, 2022, this Decree provides interest rate support for loans in Vietnam dong resulting from commercial banks' lending activities to customers who are enterprises, cooperatives, and business households.

Specifically, the following industries will be supported by loans: aviation, transportation and storage, tourist, hotel services, catering, education and training, agriculture, forestry and fishing, processing, manufacturing, and publishing software; computer programming and related operations; information service activities; includes construction activities directly servicing the aforementioned economic sectors, but excluding construction for real estate commercial objectives. On the list of projects collected and presented by the Ministry of Construction, however, initiatives to create social housing, worker housing, and repair old apartments will also receive interest subsidies.

The decree concentrates on interest rate support for groups of service and manufacturing industries that have been experiencing significant challenges owing to the Covid-19 outbreak and require financial policy help for reconstruction. As a result of the government's enhanced supervision in the capital sector, particularly in corporate bonds and real estate, the banking and real estate sectors, which attract a great deal of capital from the market, have recently slowed down. This is necessary for a healthy economy and will assist capital markets such as the stock market in the long run. Since the beginning of April, the VN-Index has undergone six consecutive weeks of decrease, the largest loss since 2020, due to pressure from the Fed and global central banks to boost interest rates, and is currently recovering. 3 weeks currently. It might be claimed that Decree 31 provides a timely boost to the stock market.

When the economy has stabilized following the pandemic, both the service and manufacturing sectors will benefit from the return of production and business, as well as the recently released 2% interest rate support package, which will be the driving force. The force that will propel the economy, increase earnings, and positively impact the stock market shortly.

In addition to the service and manufacturing sectors, the banking group, which comprises a significant share of the VN30 group, also benefits from this interest rate assistance package when it can extend its credit scale and growth rate, hence boosting net interest income. Recently, a group of state-owned banks has taken the initiative to reduce lending rates to aid customers throughout the pandemic. Currently, banks are simultaneously requesting that the State Bank consider extending credit "space" to deploy the support package while maintaining its position as a provider of liquidity to boost economic growth.

Nguyen Dung