Standard Chartered in its August report advised Vietnam to continue tightening its monetary policy by further hiking interest rates from now till the end of the year, but not to hurt the country’s GDP growth rate.
Currently, Vietnam has averted a current account crisis mainly thanks to its improved trade balance, however, Vietnam authorities tend to depreciate the dong to boost exports to offset the domestic shrinking demand, Standard Chartered’s report noted.
The government of Vietnam has chosen to cut imports to reduce hefty trade deficit, particularly slashing steel imports to US$430 million in June and July, down from US$1 billion of steel for inventories in Mar this year, the report said.
If the improvements in the trade balance are to be maintained, the target of controlling trade deficit to US$20 billion this year is achievable, and will be compensated by FDI disbursement estimated at US$10 billion, about US$8 billion of ODA and plus overseas remittances, the report added.
The bank also pointed out that impacts of the interest rates hikes in April and May this year have remained limited to the whole economy, with the growth of mining and coal exploration declined 12.2 per cent on year, construction sector’s growth rate dropping 5 per cent, however, machinery and service sectors growing 12.6 per cent and 7 per cent, respectively, the Thoi Bao Kinh Te newspaper said.
Meanwhile, retailers’ revenues soared 30 per cent in the first five months this year.
In the first half this year, Vietnam’s economy expanded 5.8 per cent, the lowest level since the first quarter of 2000. (Vietnam Economic Times)
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