Vietnam sees inflation at almost 21% in June

Vietnam has tightened its monetary policy and set a series of targets to help stabilise an economy facing challenges including its struggling currency -- the dong -- and a trade deficit

June 24, 2011
By Hoang Dinh Nam | AFP

Vietnam's inflation rate, already one of the world's highest, rose again in June to almost 21 percent, according to official estimates released Friday.

The consumer price index is expected to rise 20.82 percent this month compared with June last year, the General Statistics Office said.

Prices have risen every month since August 2010, although inflation is still below a recent peak of 28.3 percent recorded in August 2008, and far from the triple-digit figures seen in the 1980s.

The latest increase had been expected by economists, who see price pressures easing toward the end of the year.

"We are expecting that inflation will (be) likely to peak in June 2011 at around 22 percent," Deepak Mishra, the World Bank's lead economist in Vietnam, said early this month.

He sees inflation gradually falling to about 15 percent by December, underpinned by government targets to control credit and liquidity.

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 stabilise an economy facing challenges including its struggling currency -- the dong -- 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.

"Confidence in the government strategy's success remains fragile," the International Monetary Fund said earlier this month.

"The immediate challenge will be to respond to the upward trend in inflation, and prevent it from feeding into higher inflation expectations and putting pressure on the dong."

This requires further increases in key interest rates, the IMF said, adding that markets must be persuaded that a tighter monetary policy will continue until inflation is seen firmly back in single digits.

The communist country has one of the top five inflation rates in the world, the United Nations said in May.

Food prices are a key driver. They were up more than 22 percent in the first half of this year, compared with the same period in 2010, GSO data showed.

The government this month said it hopes to keep inflation at about 15 percent this year, an upward revision from its earlier full-year target of seven percent.