HSBC: Vietnam successful in curbing inflation

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Báo Đầu Tư English - 25 month(s) ago 16 readings

HSBC: Vietnam successful in curbing inflation

Vietnam’s successful implementation of tightening measures in 2011 has curbed demand for credit and slowed inflation significantly, said the Hong Kong and Shanghai Banking Corporation in its report released in May this year.

According to the report, credit growth slowed from 27.7 per cent in 2010 to 10.9 per cent in 2011.

While the State Bank of Vietnam (SBV) reserved the tightening process in late 2011 and eased policy rates in 2012, overall lending fell by 1.9 per cent year-to-date through March, suggesting that domestic demand is much lower than expected.

With credit contracting in the first quarter and the economy slowing, the SBV is likely to ease policy rates further in the coming quarters.

Dampened demand has had two positive effects – inflation slowed remarkably and will likely reach single digit by May, and demand for imports slowed significantly, thereby improving the trade balance and the stability of the Vietnam dong.

Even exports, which have been resilient, would slow due to a less competitive Vietnam dong as well as sluggish external demand.

On the whole, net exports should improve due to weaker imports, but domestic appetite for consumption should be particularly low in 2012. As such, HSBC forecasts Vietnam ’s economic growth in 2012 at 5.1 per cent and inflationary pressures to ease even more, to 9.8 per cent.

The balance of trade and FDI has now been in positive territory for six months, which has aided the stability of the Vietnam dong.

Real rates, as measured using the OMO interest rate, are actually now in positive territory for the first time in over two years, the report said.

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