Vietnam aims to cut credit growth to fight inflation

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Vietnam's central bank is aiming to cut growth in credit in 2011 to 23 percent from more than 27 percent this year as part of its effort to bring down inflation.

The State Bank of Vietnam is also targeting money supply (M2) growth of between 21 percent and 24 percent in 2011, after 23 percent this year, it said in a statement on Tuesday, Dec 28.

The central bank will coordinate its measures with fiscal and macroeconomic policies to help contain inflationary pressures and stabilize the economy, which will top its agenda next year, the statement said.

The central bank would consider granting credit growth quotas to banks based on their size and operations, the Sai Gon Times newspaper said in an online report.

Loans in the banking system grew an estimated 27.65 percent this year, above the central bank's target of 25 percent, central bank governor Giau said last week.

The International Monetary Fund has said that even 25 percent was "too high for the economy" and that official targets for credit growth ought to be significantly lower.

Lending would have jumped 29.81 percent from 2009, and money supply could have risen 25.3 percent, if gold prices and changes in the dollar/dong exchange rate in 2010 were taken into account, according to the central bank's statement on Tuesday.

The government has projected economic growth next year of between 7 percent and 7.5 percent, against an expected 6.7 percent this year.

Annual inflation hit 11.75 percent this month, the highest since February 2009. Vietnam wants to contain the rise in consumer prices next year at 7 percent.

Inflationary pressures are expected to continue in the first two months of 2011 as prices often increase before Tet, the Lunar New Year festival, which falls in early February next year.

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