Vietnam's inflation eases to lowest in more than two years

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Vietnam's economy grew 5.9 percent last year, and the government is aiming for a 6.0-6.5 percent expansion this year

Vietnam's inflation slowed for a 10th month to the lowest level in more than two years, leaving room for further interest-rate cuts to support growth.

Consumer prices climbed 6.9 percent in June from a year earlier, the General Statistics Office said in Hanoi Sunday, the lowest since December 2009 and down from 8.34 percent in May. The median of five forecasts in a Bloomberg News survey was for a 7.5 percent rate.

The pace of price gains has eased as slowing economic growth crimped consumption and concerns over the health of Vietnam's banking industry led to a contraction in outstanding loans through April. Gross domestic product expanded the least since 2009 last quarter, and the central bank has reduced borrowing costs for four straight months to shield against a faltering global recovery.

"Decelerated global commodity prices, especially food, and lower-than-expected domestic demand growth" are helping lower the inflation rate, Hai Pham, a Singapore-based analyst at Australia & New Zealand Banking Group Ltd., wrote in a note this month. ANZ said it has revised its year-end inflation forecast for Vietnam to almost 7 percent from 9 percent to 10 percent previously.

The finance ministry on June 21 said it had cut gasoline, diesel and kerosene prices after global costs fell. The government is targeting inflation of 7 percent to 8 percent this year, and a 6 percent expansion in GDP, Deputy Prime Minister Nguyen Xuan Phuc said on June 15. On June 21, Vu Viet Ngoan, chairman of the National Financial Supervisory Commission, said annual inflation may slow to 5 percent to 6 percent by year-end.

Slower growth

Prices in June fell 0.26 percent from the previous month, the Statistics Office said. Food costs rose 6.3 percent from a year earlier and slipped 0.23 percent from the previous month.

Vietnam should prioritize containing inflation even if it means accepting "somewhat slower growth" in the short term, the International Monetary Fund said this month. Price gains will probably reverse their downward trend in the second half of the year, and policy easing may "cause inflationary pressure to re-emerge" in three to four months, the World Bank said earlier this month.

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