Vietnam inflation nears 20 pct: official data

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Vietnam's inflation will reach almost 20 percent year-on-year in May, official estimates said Tuesday, adding to the pressure on consumers facing some of the steepest price rises in the world.

The consumer price index is expected to rise 19.78 percent this month compared with May last year, the General Statistics Office said.

Inflation has increased every month since August of last year, but is still below the 28.3 percent recorded in August 2008.

The country has one of the top five inflation rates in the world, and poverty will increase as a result, the United Nations in Vietnam said earlier this month.

Food prices are a key driver of the price rises.

The government, long focused on economic growth, now says fighting inflation is its top priority.

It has tightened monetary policy and set a series of targets to help stabilize an economy facing challenges including a struggling currency and a trade deficit.

Among its goals, the government wants commercial banks to keep growth in credit, or loans, to below 20 percent this year. It also said public investment should be reduced.

"The suite of policies they're undertaking is very encouraging," said Vishnu Varathan, Asia economist at Capital Economics consultancy in Singapore.

But he said inflation will not peak until the third quarter, and further hikes of key interest rates would not be surprising.

"I think Vietnam has not established beyond doubt that it is well on course to establish macro stability," Varathan said.

The government's full-year inflation target is seven percent.

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