Last month, the Central Bank in Vietnam reduced the refinance rate from 7% to 6.5%. This was intended to support business by spurring credit growth. The central bank data showed that lending contracted by 1.05% in March from the end of 2013, while the government’s growth target stands at between 12%?14% in 2014. In its attempts to attract more foreign investment, Vietnam is trying to create favourable conditions for foreign investors to take part in the sale/purchase of bad debt. Earlier this year, foreigners were allowed to buy larger stakes in the country’s banks. The new entity bought bad debt of around $1.9 billion worth last year and may buy more than four times this amount in 2014. Furthermore, a legal framework is to be set up to help create a regulated market for bad debt. The successful management of bad debt would support lending and businesses, in addition to providing a less risky environment for foreign investment. Inflation in Vietnam registered 4.7% y-o-y, signalling the slowest pace since November 2009, while exports perked up by 12.3% y-o-y in January and February of this year. The HSBC manufacturing PMI showed that new orders rose at the fastest pace since October 2013. The reading was up slightly from 51.0 in February and pointed to a seventh consecutive monthly improvement in operating conditions.
The recent months’ increases of electricity tariffs and subsidized fuel are putting pressure on inflation in Malaysia. Inflation climbed by 3.4% y-o-y in January, the fastest pace since October 2011. Thus, the more downside risks to the nation’s GDP growth are now officially acknowledged by the central bank, which brought down its lower range of 2014’s growth to 4.5% from 5.0%. Accordingly, the officially forecasted range now stands between 4.5% and 5.5%. Last year, portfolio investment outflow from Malaysia amounted to around 2.8 billion ringgit against an inflow of 58.4 billion ringgit in 2012.
In Indonesia, inflation eased to 7.8% in February, dipping below 8% for the first time since October of last year. Bank Indonesia maintained the reference rate at 7.5% on the back of slowing inflation and a strengthening rupiah. The Ministry of Finance expects a possible growth slowdown this year of 5.5%?5.8%, the least since 2009, as the government is trying to limit the current account deficit. The country’s manufacturing sector continued to grow, but at a slower pace, with the manufacturing PMI dropping slightly, close to 50. The PMI posted 50.1 last month, down from 50.5 in February, with output contracting despite faster growth seen in new orders.
In Taiwan, the PMI in March showed that business conditions improved at the slowest pace in six months, posting 52.7, down from February’s 54.7. The survey indicated that both output and new orders have expanded at weaker rates.