ADB warns Vietnam of inflation’s return

The Asian Development Bank has told Vietnam to stand vigilant against the return of inflation, which could be aggravated by higher commodity prices and the rapid growth of money supply as the global economy recovers.

“The government is fully aware of the growing risks,” ADB Country Director for Vietnam Ayumi Konishi said as he released the Asian Development Outlook 2009 Update (ADOU) in Hanoi on September 22.

Inflation is now forecast at 8.5 percent next year, revised up from 5 percent, according to the ADOU. This year, inflation is estimated at 6.8 percent.

Period-average inflation eased to 8.3 percent between January and August from 23 percent in 2008. However, inflation pressures reemerged in the second quarter as commodity prices edged up and growth accelerated.

The ADB suggested the State Bank of Vietnam pursue moderately tight monetary policy in 2010 to support the dong and to counter inflation pressures stemming from accelerating growth and rising world commodity prices.

Country economist Bahodir Ganiev said Vietnam should not issue more financial stimulus before carefully assessing the medium-term effects of the existing package.

ADB has revised up its gross domestic product (GDP) growth forecast for Vietnam for 2009, from 4.5 percent projected in March to 4.7 percent, and maintained the projected growth of 6.5 percent for 2010.

The country’s economic slowdown appears to have bottomed out early in 2009, as year-on-year GDP growth has continued to quicken since the first quarter of the year.

Ayumi Konishi said, “We would like to congratulate the government and the people of Vietnam, because we can make this positive assessment as a result of the quick and strong policy measures the government has taken in minimizing the adverse impact of the global economic downturn on Vietnam.”

In June, the National Assembly of Vietnam lowered the official GDP growth target for 2009 to 5 percent from 6.5 percent, and raised the ceiling on the budget deficit to 7 percent of GDP from 4.8 percent.

Ngan Anh

thanhnien

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