The State Bank of Vietnam (SBV) should gradually loosen monetary policies in 2012, ANZ Bank suggested, adding that that the main objective is to control inflation below 10% and achieve real GDP growth rate of 6-6.5%.

According to quarterly Vietnam Economic Development Report of ANZ, in the fourth quarter of 2011, Vietnam’s GDP grew by 6.1% on quarter, resulting in 2011 full-year GDP growth rate of 5.9%, lower than 6.8% in 2010. “The local economy shows signs of slowing down, and we [ANZ] think that Vietnam has avoided overheated growth”, the report said.

According to ANZ, thanks to narrowed trade deficit and improved balance of payment (BoP), the dollar exchange rates were somewhat stable in Q2 and Q3/2011. However, the domestic currency, the dong, continued to face downward pressure in the fourth quarter.

Tight fiscal policies of the government have helped to cut budget deficit to below 5% GDP and to control inflation. In 2012, the country targeted budget deficit to be VND140.2 trillion, lower than 5% of projected GDP.

Real interest rates were less negative from last September due to easing inflation, ANZ’s report said, yet warning that it was too early to loosen monetary policies immediately.

 

Source Sophie/ StoxPlus