Citigroup Forecasts Vietnam Will Raise Rates This Year
The State Bank of Vietnam, the country’s central bank, may raise interest rates this year as inflation begins to accelerate amid expectations that the Vietnamese dong will weaken further, Citigroup Inc. said.
“The State Bank of Vietnam will have to start tightening monetary policy as early as this year,” Johanna Chua, the Hong Kong-based head of Asian economic research for Citigroup, said.
“Maintaining the current loose policies is unsustainable” as inflation may begin accelerating this month, she said.
The SBV said last month that it will keep benchmark lending rate at 7% for now to ensure the country’s GDP growth of at least 5% this year, Chua said, adding the Vietnamese dong is forecast to weaken.
Last month, Vietnam’s inflation eased to 2%, down from 28.3% a year earlier and was the slowest rate since 2002.
Chua also said a ‘rigid’ foreign-exchange peg, the country’s trade deficit and “lackluster” capital flows are hurting Vietnam’s foreign reserves, which fell to US$17.6 billion by the end of June from US$23 billion at the end of 2008. (vnbusinessnews.com, Bloomberg)
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