Vietnam’s economic growth may slow to 5.3 percent this year as local and overseas demand cools, according to a government advisory committee, signaling policy makers are accepting slower growth that will ease inflation.
“It’s good enough, given the current difficult market situation domestically and internationally,” Vu Viet Ngoan, chair of the National Financial Supervisory Commission, said in a telephone interview on Friday. The economy expanded 5.9 percent in 2011 and the government’s official 2012 growth target has already been reduced to 6 percent from as much as 6.5 percent.
Vietnam has struggled with stagnant bank lending and the fastest inflation in Southeast Asia, which crimped corporate expansion and domestic demand. Easing price pressures this year have given the central bank room to cut interest rates five times to shield the economy from Europe’s debt crisis and China’s growth slowdown, reversing monetary tightening undertaken last year to prevent overheating.
“Downward growth revisions from policy makers suggest the focus on macro stability remains,” said Prakriti Sofat, a regional economist at Barclays Plc in Singapore. “Policy maker comfort with economic growth moderation will provide more confidence to market participants that Vietnam will not undertake additional aggressive easing which may raise risks to macro stability.”
Annual inflation may be “around 5 percent” with month-on- month gains for the rest for the year on government spending, Ngoan said. Vietnam’s consumer prices climbed 5.35 percent in July from a year earlier after rising 6.9 percent in June.
Credit growth has been hampered by rising bad debt at lenders, which government Office Chair Vu Duc Dam said this week continues to be on an “uptrend.”
Total assets of the Vietnamese banking system rose to 4,906 trillion dong as of June 30, an increase of 0.4 percent from 4,887 trillion dong as of May 31, according to data on the central bank’s website.
Government bonds gained for a fifth day, with the benchmark five-year yield sliding two basis points, or 0.02 percentage point, to 9.73 percent. That’s the lowest level in almost a month, according to a daily fixing rate from banks compiled by Bloomberg.