UPDATE 1-Vietnam ministry lowers growth goal, focus on inflation

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By John Mair | Reuters

HANOI, May 3 (Reuters) - A key Vietnamese government ministry has lowered its expectations for economic growth this year and significantly raised its target for inflation in a clear acknowledgement that soaring consumer prices will put a dent in the economy.

The Ministry of Planning and Investment was targeting gross domestic product growth of around 6.5 percent, Minister Vo Hong Phuc said on Tuesday, lower than the official, parliament-approved target of 7-7.5 percent,

The Ministry also expects consumer price inflation this year to be around 11.75 percent, he told a forum at the Asian Development Bank's (ADB) annual meeting in Hanoi. The official target set late last year is for inflation of 7 percent or less.

"The top priority is to fight inflation. We are no longer prioritising GDP growth. We want to keep GDP growth at a reasonable level that is acceptable in this inflation situation," Phuc said.

The old growth target was no long appropriate, he said.

The consumer price index rose 17.51 percent in April from a year earlier after rising an annual 13.89 percent in March.

The April inflation rate was the highest since December 2008, and the economists say it follows an over-emphasis on growth last year and inaction in the face of signs that inflationary pressures were rising.

On Friday the State Bank of Vietnam increased both the refinance rate and the discount rate by 100 basis points. [ID:nL3E7FT17P]

Vietnamese authorities have raised various interest rates several times since mid-February, trimmed the official credit growth target for the year, cracked down on black market foreign currency trading and vowed fiscal spending cuts.

The ADB warned last month economic overheating and inflation threatened a sustained recovery in parts of developing Asia, and said a sustained rises in food prices could pull tens of millions into poverty.[ID:nL3E7F60B1] [ID : nL3E7FQ4EM]

Economists say high inflation has persisted in Vietnam in part because of double-digit increases in the prices of electricity as well as petrol, diesel and other fuels. (Reporting by John Ruwitch and Tran Le Thuy; Editing by John Mair)