Vietnamese inflation at seven-month low

TN News

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A street flower vendor sitting counting bank notes on a street in downtown Hanoi.

Vietnamese inflation slowed to the weakest pace in seven months in April, official data showed Wednesday, in the latest sign that the country's economy is losing steam.

Consumer prices rose 6.61 percent year-on-year in April, the Government Statistics Office said, slightly less than the 6.64 percent increase reported in March.

Economists say the slowdown in inflation is the result of past monetary policy tightening as well as cooling domestic consumer demand.

In 2011, Vietnam repeatedly raised interest rates to prevent the economy from overheating and to rein in double-digit inflation, but with the economy weakening the authorities last year resumed stimulus efforts.

Vietnam cut interest rates in March for the seventh time in little more than a year, in a bid to spur bank lending and boost consumption after economic growth fell to a 13-year low of 5.03 percent in 2012.

"The risk of another cut remains" if inflation continues to fall and the economy shows no sign of improvement, ANZ bank said in a research note released on Wednesday.

But lower official borrowing costs alone will not solve the problem of tight credit as the banking system needs to be restructured and non-performing loans tackled, it added.

ANZ said it expected Vietnam's inflation to average between six and eight percent this year, which is also the government's target.

In the first quarter of the year, the country's Gross Domestic Product (GDP) grew by 4.89 percent from a year earlier with authorities warning of an "extremely challenging" outlook.

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