Vietnam eyes rates to rein in inflation
Raphael Minder | Thursday, 19 June 2008
KUALA LUMPUR: Vietnam is ready to raise interest rates further to bring inflation back below 10 per cent before the end of next year, from 25.2 per cent in May, according to its finance minister.
Vu Van Ninh has said returning to a single-digit inflation rate was "possible before the end of next year and is our set goal".
Food accounts for almost 43 per cent of the consumer price index in Vietnam but Mr Vu said Vietnam was confident it now had sufficient supplies to avoid further price increases, as well as export 4.5m tonnes of rice this year.
However, he said the rise in the oil price was "more of a problem", although Vietnam would also benefit from higher revenues for its oil exports.
"Inflation control is the priority now," Mr Vu told participants at the just-concluded regional meeting of the World Economic Forum. "We fully understand that controlling inflation will not be an easy task and we need a certain amount of time to do this."
The Vietnamese stock market has plunged 60 per cent this year, the steepest decline worldwide, amid concerns that the economy is overheating.
The Vietnamese central bank in the second week of this month raised interest rates by two percentage points to 14 per cent, the highest level in Asia. Vietnam also lowered the value of its currency, the dong, by almost 2.0 per cent.
Mr Vu left the door open for further monetary tightening, but not for a steeper currency move.
"We don't intend to make a depreciation of the dong as it would have a great impact on our economy," he said. (Under syndication arrangement with the FE)
Vu Van Ninh has said returning to a single-digit inflation rate was "possible before the end of next year and is our set goal".
Food accounts for almost 43 per cent of the consumer price index in Vietnam but Mr Vu said Vietnam was confident it now had sufficient supplies to avoid further price increases, as well as export 4.5m tonnes of rice this year.
However, he said the rise in the oil price was "more of a problem", although Vietnam would also benefit from higher revenues for its oil exports.
"Inflation control is the priority now," Mr Vu told participants at the just-concluded regional meeting of the World Economic Forum. "We fully understand that controlling inflation will not be an easy task and we need a certain amount of time to do this."
The Vietnamese stock market has plunged 60 per cent this year, the steepest decline worldwide, amid concerns that the economy is overheating.
The Vietnamese central bank in the second week of this month raised interest rates by two percentage points to 14 per cent, the highest level in Asia. Vietnam also lowered the value of its currency, the dong, by almost 2.0 per cent.
Mr Vu left the door open for further monetary tightening, but not for a steeper currency move.
"We don't intend to make a depreciation of the dong as it would have a great impact on our economy," he said. (Under syndication arrangement with the FE)