The State Bank of Vietnam (SBV) announced it is slashing its key interest rates by 50 basis points (bps) effective Monday to boost slowing economic growth.

The refinance rate was reduced to 4.5%, the discount rate to 3.0% and the electronic interbank rate to 5.0%, according to a central bank statement.

The rate cuts are an attempt to bolster the country’s manufacturing-driven economy during weak global demand and a credit growth slowdown, Reuters news agency reports.

On Friday, Vietnam’s government urged the central bank to “immediately take practical measures to lower interest rates level, with a round of policy rate cuts this month.”

Furthermore, SBV announced it would lower the cap on interest rates offered by commercial banks on Dong deposits with maturities between one and six months to 4.75% from 5%.

It’s hoped the move will boost loans to households and businesses due to declining exports and a contraction in the real estate market.

Economic growth in Vietnam fell to 3.3% in Q1 2023 from 5.9% in Q4 last year as a result of sluggish demand in key export markets, whilst manufacturers reported a decline in orders and electricity cuts due to power shortages, according to the General Statistics Office.

During the first five months of this year, Vietnam reported a 12.3% fall in exports, impacted by declining shipments of products, including smartphones and electronics.

In addition, credit growth within Vietnam’s banking system between January and May rose 3.17% from the end of last year, according to the central bank, under the 8% growth from the same period in 2022.

In a bid to offset the economic headwinds, the country’s central bank has cut its policy interest rates four times so far in 2023.