Vietnam’s banking liquidity is improving, easing funding pressures and raising hopes that dong interest rates may have reached their near-term peak.

As reported by The Investor, Vietnam’s dong rates may be close to peaking as deposit growth finally overtakes credit expansion.

Banking liquidity has improved, with dong deposits rising 8.77% from the start of 2026 to August 22, compared with 8.38% growth in outstanding credit, Deputy Finance Minister Tran Quoc Phuong said.

The shift suggests pressure on banks to compete for deposits is easing. However, analysts caution that it is too early to expect a broad rate-cutting cycle.

Strong economic growth continues to drive demand for capital. Vietnam’s economy expanded 8.18% in the first half of 2026, while the industrial and construction sector grew 9.81%. Continued infrastructure investment could keep borrowing demand elevated through the rest of the year.

International conditions are another constraint. Uncertainty over US Federal Reserve policy, together with pressure on the USD/VND exchange rate, limits how far Vietnam can reduce dong rates without risking capital outflows or currency weakness.

Funding costs are also unlikely to fall immediately. Deposits raised at relatively high rates, particularly those with six- to 12-month maturities, will remain expensive until they mature. This means banks’ average funding costs may stay elevated even if headline deposit rates stabilise.

Research houses broadly expect rates to remain relatively stable, although conditions could differ significantly between lenders. Banks with strong deposit bases may reduce lending rates to attract customers, while smaller institutions facing tighter funding conditions could keep deposit rates competitive.

The most likely outcome is therefore a period of rate stability, rather than sharp cuts. Also, more favourable scenario could emerge if deposits continue.