Lending rates could remain stable in 2025

Global Interest Rates Continue to Decline

In 2025, global interest rates are projected to trend downward compared to 2024, as central banks worldwide continue to cut rates, focusing more on promoting growth and employment.

In 2024, the U.S. Federal Reserve (FED) cut interest rates by a total of 100 basis points. However, the risk of inflation resurgence due to proposed import tariff policies by the incoming administration of President-elect Donald Trump may force the FED to slow down its rate-cutting pace. As a result, the FED’s rate reductions may proceed at a slower pace compared to other regions.

Similarly, the European Central Bank (ECB) is also expected to lower its benchmark interest rates to support economic growth. In Europe, the EU experienced modest economic recovery in 2024, with GDP growth estimated at 0.9%, compared to 0.3% in 2023. The ECB has already cut rates three times and recently implemented a fourth reduction, bringing the rate down to 3%. Given the weak economic growth and declining inflation, the ECB is likely to continue easing monetary policy further in early 2025, potentially in January, when inflation is expected to stabilize at the ECB's target of 2%.

In contrast, the Bank of Japan (BoJ) was the only major central bank to raise interest rates in 2024, with two rate hikes. The BoJ's interest rate hike in July 2024 surprised global financial markets. Therefore, the BoJ is not expected to rush into another increase from the current 0.25% level. Japan's economic outlook for 2025 is relatively favorable, with inflation goals expected to be sustainably achieved, alongside improved economic growth driven by consumption and investment. This will provide a basis for the BoJ to continue normalizing monetary policy, with benchmark rates projected to reach a neutral level in 2025.

Interest Rate Trends in Vietnam

In Vietnam, interest rate trends, exchange rate pressures, and inflation risks remain prominent, especially as the U.S. dollar is expected to strengthen in 2025.

Deposit interest rates will continue to face upward pressure to narrow the gap between total deposits and outstanding credit in the banking system and enhance the competitiveness of savings deposits compared to the returns from other investment channels in the market.

Additionally, the need to ensure liquidity and meet credit demand will prompt many banks to increase fundraising efforts to balance liquidity and maintain financial safety ratios. These factors may cause deposit interest rates to rise slightly at the beginning of 2025 and remain stable, supported by efforts from the State Bank of Vietnam (SBV) to promote credit growth. The SBV's directive to "closely monitor domestic and international market developments and be ready to provide liquidity support for credit institutions to supply credit to the economy while promptly implementing appropriate monetary policy solutions" will help maintain this stability.

However, the upward trend in deposit interest rates will vary across banks.

• State-owned banks are expected to keep deposit rates stable at current levels to support economic growth.
• Private commercial banks, on the other hand, are likely to experience a slight increase in deposit rates to boost capital mobilization and support credit growth, particularly for banks that rely heavily on customer deposits.

Lending Interest Rates

Lending interest rates are expected to remain stable and stay low throughout 2025, in line with the goal of supporting economic growth. In the short term, however, lending rates will exhibit differentiation:

• Interest rates for priority sectors such as agriculture and exports, which benefit from preferential loan programs, may continue to decline slightly.
• Meanwhile, lending rates for sectors with a faster recovery pace and higher risk, such as real estate and construction, are likely to increase, following the upward trend of deposit interest rates.

A low interest rate environment will provide a boost to credit demand, with retail credit growth accelerating due to rising business activities and consumer demand, further stimulating production and exports. Additionally, it will support the disbursement of public investment and the continued recovery of the real estate market, leading to increased credit growth in segments such as real estate businesses, construction, and building materials.