Ina study about the development situation and prospect of newly emerging markets, Switzerland based investment bank Credit Suisse recently released the report titled “Vietnam: Time to be nevours” giving its assessment on Vietnam’s economy.
In which, the Swiss bank remarked difficulties and challenges Vietnamese economy has had to continue facing in the next time.
Inflation pressure is the first issue the report concerned. Net investment capital inflows into Vietnam at the moment and a high economic growth caused pressures on prices especially prices of food in the country. This has affected strongly to Vietnam’s Consumer Price Index (CPI) through a dizzy rise in prices of land, lending growth and supply shortage.
Credit Suisse predicted, February CPI that increased by 15.7% year on year could exceed 18% in the first half of this year.
According to the report, Vietnamese government gives high priorities to measures to curb inflation effectively, however the country’s macro policies need to be tougher in order to both ease inflation pressure and maintain high economic growth. Effectiveness of monetary tightening up policies so far have not been promoted so high inflation and periodic “broken bubble” are considered to be foreseeable risks during the last 12 months, said Credit Suisse bank’s specialists.
In the next time, Vietnamese government could continue maintaining combined measures with expectation that inflation could be reduced if the global economy growth slows down. However, there should be to control the net foreign capital inflows to Vietnam, which is the decisive factor to ease inflation pressure. The capital control could be concerned further but Vietnam’s authorities also could release another strong measure that will make investors dispirited and lose faith in the economic development.
The foreign bank also forecasted that the dong will continue appreciating by about 4-5% against the greenback till the year end when US$1 can be converted into 15,200 dong.
The forex rate amplitude was expanded twice in the last three months, and to be continued in the next time.
Possibly, the Vietnamese government could select to increase the dong price against US dollar to minimise risks and offer new moves to tighten up monetary market such as monitoring prices of some goods items, raising discount interest rate and compulsory reserve ratio, according to the report. Particularly, Vietnam’s discount could be increased by 1% to 7% by the first quarter of 2009.
Despite of aforementioned difficulties, Credit Suisse still confirmed that Vietnam will be able to continue maintaining a high economic growth in medium term if without sudden problems. But, the bank forecasted, Vietnam’s GDP in 2008 will be declined from the previous 9.1% down to 8.5%.