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Payment balance signals resilience
Viet Nam's balance of payments has shown signs of resilience in 2010, in two areas in particular, according to the latest report issued by Standard Chartered Bank.
The average monthly trade deficit was contained at US$960 million during the first nine months of the year, compared with $2.2 billion in 2008.
Stable commodity prices in 2010 have been helpful in this regard, as the cost of imports, especially steel, petrol and petrochemicals, has remained broadly stable. A pick-up in overseas workers' remittances was also helping to limit the current account deficit, reported the bank.
Capital inflows from foreign direct investment (FDI) and official development assistance (ODA) are improving, and this has been helpful to fund the current account deficit.
Notwithstanding potential inflation and trade deficit pressures, the bank expects Viet Nam to be the third fastest growing economy in Asia in 2011, after China and India, with forecast growth rates of 6.7 per cent in 2010 and 7.2 per cent next year.
Edward Lee, the bank's Regional Head of Rates Strategy for Asia, said the government should focus on stabilising the macro-economy and the State Bank of Viet Nam needed to adjust monetary policy based on the economy's demands.
Lee said he believed that Viet Nam would tighten monetary policy to curb inflation and build market confidence if the nation foresees higher inflation in 2011 due to stronger GDP growth and growing food prices on the global market.
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