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Vietnam’s policies may prevent economy from deteriorating: ADB
Vietnam may have prevented a further deterioration of the economy by raising interest rates and slowing credit growth, the Asian Development Bank (ADB) said.
The State Bank of Vietnam has increased its benchmark interest rate three times this year to the highest in Asia, capped credit growth for the year, and is requiring banks to set aside more money for reserves.
Other Vietnamese government directives have also required state agencies to cut spending.
“There are encouraging signs that the authorities’ tightening polices are starting to work,’’ the ADB said in a report released Tuesday.
“Import growth has slowed while the dong is stabilizing.’’
A “loose monetary and fiscal stance’’ in past years caused inflation to accelerate and the deficit to widen, the Manila-based ADB said.
The year-on-year inflation rate has climbed to the highest since at least 1992 and the trade shortfall has already surpassed the level for all of last year, putting “intense pressure” on the Vietnamese dong.
Vietnam imported about US$6.8 billion worth of goods in June, down from $7.9 billion in May, according to figures from the General Statistics Office in Hanoi.
Imports have grown at a faster pace than exports, leading to concerns about a possible currency crisis, Moody’s Economy.com said this month.
The Vietnamese dong was unchanged at VND16,640 per dollar Wednesday, according to data compiled by Bloomberg.
The State Bank of Vietnam set a reference rate for the currency of VND16,496 per dollar, compared with VND16,498 Tuesday, according to its website.
The dong is allowed to trade up to 2 percent on either side of that rate.
So-called unofficial market exchange rates have in the past few weeks valued the dong at about 15 percent below the official level, the ADB said.
“As emerging East Asian economies are facing a growing inflation challenge, greater exchange-rate flexibility will make monetary policy more effective,’’ the lender said.
Thanhnien
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