Bloomberg News

Vietnam Will Be ‘Very Cautious’ With More Interest Rate Cuts

August 21, 2012

Vietnam’s central bank will be “very cautious” with regard to additional cuts in interest rates because it may increase inflation and currency instability.

The monetary regulator doesn’t expect to lower the dong deposit rate further, as it may prompt depositors to switch from dong to dollars and gold, and fuel inflation, Central Bank Governor Nguyen Van Binh said during a National Assembly meeting broadcast live on state television today. The central bank has cut its key refinance rate five times this year.

“We did the right thing in lowering interest rates so far this year,” Binh said, responding to questions from lawmakers. “We would be very cautious in cutting rates further.”

Vietnam is struggling to boost a slowing economy while trying to control an inflation rate that was once the fastest in Southeast Asia. The central bank has cut interest rates and approved expanded credit at banks to help businesses and spur economic growth. The central bank is aiming for credit growth of 8 percent this year, Binh said today.

Deputy Prime Minister Vu Van Ninh has said the country may miss its 6 percent growth target after the economy grew by 4.7 percent in the three months to June from a year earlier. Consumer prices may rise in August from July because of higher power and fuel costs, the Ministry of Finance said on Aug. 15.

Annual inflation may accelerate to between 6 percent and 7 percent at the end of this year, Binh said. Economic growth may slow to as low as 5.1 percent, Nguyen Duc Kien, deputy head of the National Assembly’s economic committee, said in an interview in Hanoi yesterday.

To contact Bloomberg News staff for this story: Nguyen Dieu Tu Uyen in Hanoi at uyen1@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net


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