The Asian Development Bank (ADB) on Sept. 14, recommended that Vietnamcontinue to maintain its tightened policy in order to lowerinflation.
In its Asian Development Outlook 2011 Update (ADOUpdate), the ADB said Resolution 11, a comprehensive policy package, hasmade good initial progress by helping the exchange rate to stabilise,allowing foreign reserves to be replenished, and lowering monthlyinflation outcomes during June - August.
It was too early,however, for Vietnam to ease macroeconomic policies, as year-on-yearheadline inflation remained above 20 percent, the report said, addingpremature easing could undermine macroeconomic stabilisation efforts,erode business and consumer confidence in the dong, and renew downwardpressure on foreign reserves.
The report forecast a slightlylower Vietnam growth outcome, from 6.1 percent to 5.8 percent for2011, increasing to 6.5 percent in 2012. Inflation was projected to easegradually to 18.7 percent, revised up primarily because of higher foodprices, before moderating to 11.0 percent next year.
ADO Update commended efforts taken by the Government but observed thatthe market was receiving mixed signals on both monetary and fiscalpolicies that was undermining the effectiveness of the macroeconomicstabilisation package.
"Investors and residents arelikely to have more confidence in economic management if policies andpolicymaking are given greater clarity, consistency, and transparency,"said Tomoyuki Kimura, ADB Country Director for Vietnam .
The ADB report said deteriorating bank credit quality remained a risk.Macroeconomic tightening, after a period of rapid growth in credit,will have placed stresses on borrowers and banks. The Government neededto take concrete actions to safeguard the financial sector.
"Restoring macroeconomic stability is the immediate priority, butaddressing root causes of high inflation requires greater efforts onstructural reforms. These reforms include reducing bottlenecks inproduction and transportation, safeguarding the finance sector,increasing the efficiency of public investment, and imposing marketdiscipline on large state-owned enterprises," said Kimura./.
In its Asian Development Outlook 2011 Update (ADOUpdate), the ADB said Resolution 11, a comprehensive policy package, hasmade good initial progress by helping the exchange rate to stabilise,allowing foreign reserves to be replenished, and lowering monthlyinflation outcomes during June - August.
It was too early,however, for Vietnam to ease macroeconomic policies, as year-on-yearheadline inflation remained above 20 percent, the report said, addingpremature easing could undermine macroeconomic stabilisation efforts,erode business and consumer confidence in the dong, and renew downwardpressure on foreign reserves.
The report forecast a slightlylower Vietnam growth outcome, from 6.1 percent to 5.8 percent for2011, increasing to 6.5 percent in 2012. Inflation was projected to easegradually to 18.7 percent, revised up primarily because of higher foodprices, before moderating to 11.0 percent next year.
ADO Update commended efforts taken by the Government but observed thatthe market was receiving mixed signals on both monetary and fiscalpolicies that was undermining the effectiveness of the macroeconomicstabilisation package.
"Investors and residents arelikely to have more confidence in economic management if policies andpolicymaking are given greater clarity, consistency, and transparency,"said Tomoyuki Kimura, ADB Country Director for Vietnam .
The ADB report said deteriorating bank credit quality remained a risk.Macroeconomic tightening, after a period of rapid growth in credit,will have placed stresses on borrowers and banks. The Government neededto take concrete actions to safeguard the financial sector.
"Restoring macroeconomic stability is the immediate priority, butaddressing root causes of high inflation requires greater efforts onstructural reforms. These reforms include reducing bottlenecks inproduction and transportation, safeguarding the finance sector,increasing the efficiency of public investment, and imposing marketdiscipline on large state-owned enterprises," said Kimura./.
