Vietnam advisors ask govt to cut credit, M2 growth
Vietnam's key financial policy advisory body is urging the government to cut its credit growth and money supply targets again this year and maintain tight monetary policy in the face of high inflation, a state-run news website reported.
The National Financial Supervisory Committee proposed that the annual credit growth target be reduced to 15 percent from 20 percent, it said in a report on macroeconomic conditions in 2011 and forecasts for 2012, according to the online newspaper NDHMoney reported.
The committee, which advises the government and is composed mostly of economists and former officials, said money supply should be capped at 11-12 percent this year against the current target of 16 percent.
Vietnam has been battling some of the world's highest inflation and economists say years of soaring credit growth have contributed. Targets for money supply and credit growth were both cut earlier in the year. In August annual inflation was estimated at 23 percent, the 12th month in a row it has risen.
The committee projected annual inflation at the end of 2011 would be 18 percent. The government is targeting 15-17 percent.
Given high inflation, it would be "difficult" to meet the government's target for gross domestic product growth of 6-6.5 percent this year, and growth will instead be in the 5.5-6 percent range, it said.
In 2012, the committee expects GDP growth of 6.5-6.7 percent and inflation at 9-10 percent, the report said.
The central bank has reported that credit growth was 7.57 percent by July from the end of last year and money supply was up 3.57 percent – both well below target.
However, Le Xuan Nghia, vice chairman of the committee, has warned that it would be unwise for the government to try to attain the targets in the remaining months of the year as that would risk exacerbating inflation.
The ratio of lending to deposits at Vietnamese banks was 0.9, the second highest in East Asia, the report said. Bad debt, meanwhile, had increased to 2.91 percent in July from 2.19 percent at the end of 2010. "The bad debt ratio is higher when calculated by international standards," the report quoted the committee as saying.
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