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Vietnam Economy Sept 21

September 21, 2007
Inflation still rules risks, say analysts
Domestic inflation will have a greater impact on Viet Nam’s economy than this week’s Federal Reserve decision to unlock credit, forecasts the ANZ Bank in its September report.more

The report, published yesterday, responds to the Federal Reserve’s reduction of its benchmark interest rate by 50 basis points and says the ANZ does not expect any change in Viet Nam’s official interest rate because the central bank is unable to use such monetary tools under current policies.

Inflation – not slower US growth – remains the dominant risk, the report argues.

ANZ also says that the State Bank of Viet Nam (SBV) – the central bank – can be expected to continue to withdraw liquidity via the issuance of short term debt products on the market.

Asian countries and territories with worries about rising inflation such as mainland China and Taiwan are expected to further tighten monetary policy in the face of continued upstream price pressure and strong domestic spending, says the ANZ.

But others, including Malaysia, Indonesia, Thailand and the Philippines are predicted to slash interest rates. These countries continue to be dogged by poor consumer and business confidence, it says.

In Viet Nam, demand for US dollar to pay for imports is expected to rise from now to the end of this year and some commercial banks have increased the interest on dollar deposits in order to attract more greenbacks.

"The Fed’s sudden rate cut will partially curb that race but I believe it will not have an immediate impact as banks need time to balance supply and demand," said a Viet Nam International Joint Stock Bank senior official. VNS

Vietcombank HCM City director Nguyen Phuoc Thanh suggested that some joint stock commercial banks would reduce interest rates during the next 10-15 days. Full story on VietnamNews

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