‘Vietnam should gradually relax monetary policies in 2012’, ANZ says

ANZ Bank has said that the State Bank of Vietnam (SBV) should step-by-step relax the monetary policies in 2012. The main target is to curb inflation at below 10% and obtain the real GDP growth rate at 6-6.5%.
The proposal was concerned in the bank’s quarterly Vietnam economic development report. Accordingly, in the fourth quarter of 2011, GDP of Vietnam grew 6.1% on quarter, leading the combined GDP growth of whole 2011 to 5.9%, lower than 2010’s 6.8%. “The economy has signalled to decline, and we think that Vietnam has escaped from the overheated growth of 2010”, the report said.

Recording the reduction of nearly 1% after two years of overheated growth, the reduction in construction sector was the major reason leading to the slowdown in GDP growth. According to ANZ, due to the affects of tightened credit policies, the construction sector saw a decrease of 10.5% last year, the sharpest slump within over one decade. Meanwhile, the service field also fell slightly. December CPI of Vietnam soared 18.1% year on year after the August peak of 23%.

In addition, the country’s trade deficit was closed whilst the balance of payment was seen with a surplus. Therefore, the USD/VND forex rate was kept stable in Q2 and Q3 but the pressure of weakened VND was increasing in Q4. Yet, the Central Bank adjusted up forex rate in a limited range.

The government lately has committed to cut budgetary deficit to below 5% of GDP and control inflation this year. The budgetary deficit of 2012 is targeted at 140.2 trillion dong, lower than the estimated 5% of GDP.

From above matters, ANZ’s report showed that the real interest rate in Vietnam was less negative from last September thanks to a fall in inflation but it is too early to relax monetary policies. As proposed by the bank, the interest rate should be maintained later Tet holiday and then the Central Bank will gradually loosen monetary policies in 2012. – Vietbiz24

Tags: Vietnam banking industry, Vietnam finance, Vietnam financial

Posted by VBN on Jan 18 2012. Filed under Banking-Finance. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry