Vietnam Sees Risk Inflation Will Accelerate, Nhung Says

Vietnam faces “high risks” that inflation will accelerate toward the end of the year as the government strives to spur lending and help businesses, according to a central bank official.

“The central bank will manage its monetary policies in a manner that can bring down lending interest rates to help businesses,” Do Thi Nhung, deputy head of the monetary policy department at the central bank, told a conference in Hanoi today.

Vietnam’s bank lending has stagnated as companies contend with growing inventories and decreased demand. The economy needs to expand 6.5 percent in the fourth quarter in order to meet the government’s full-year growth target of 5.2 percent, Prime Minister Nguyen Tan Dung said last month.

The country’s inflation quickened to 7 percent in October from 6.48 percent in September. Consumer prices gained 0.85 percent from the previous month.

The central bank “should be very cautious of seasonal inflation” toward year-end in its policy management, Le Xuan Nghia, a member of the National Financial and Monetary Policy Advisory Council, said at the same conference.

The central bank is also working with the ministries of trade, agriculture and construction to help companies reduce unsold inventories as part of measures to resolve bad debts at banks, Nhung said.

Liquidity at Vietnam banks now is at a surplus and the money market has “stabilized,” Nhung said. Still, banks face difficulties in raising long-term funds, she said.

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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