High interest rates to have long impact on economy: lawmakers

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High lending rates have created huge difficulties for local firms in the first three months and this will continue to impact economic growth in the coming months, Vietnamese lawmakers said in a report Friday.

Most businesses, especially small- and medium-sized enterprises, found it very difficult to access bank loans as lending rates had climbed to as much as 17-18 percent a year at times, according to the National Assembly's Economic Committee.

For the rest of the year. the government needs to pursue a flexible monetary policy and take measures to ease difficulties for local businesses, the committee said.

The government has ordered local lenders to cut operation costs and lower interest rates to provide better credit access to their customers, Nguyen Dong Tien, deputy governor of the State Bank of Vietnam, said Wednesday.

Lending interest rates are now around 14 percent a year and deposit rates around 11 percent, he said.

"˜Challenge'

The report, released Friday at a meeting of the National Assembly Standing Committee in Hanoi, said the country had posted good economic results in the first quarter including a 5.83 percent GDP growth and an 8.9 percent increase in export revenues.

But the report noted that high inflation in the first four months has created a "great challenge" of keeping inflation under 7 percent as targeted for the year. Consumer prices increased 4.27 percent in April compared to last December, according to the General Statistics Office in Hanoi.

The Finance and Budget Committee said at the meeting that the country's budget deficit needs to be controlled to ensure economic stability and prevent high inflation.

"Most members of the committee agreed that the gap needs to be kept under 5 percent of the GDP in coming years," said Dinh Trinh Hai, deputy chairman of the committee.

Vietnam recorded a budget deficit of about 6.9 percent of the GDP last year, and is planning to cut it to 6.2 per cent in 2010.


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