Vietnam, like much of the world, is trying to stimulate its economy amid the global downturn, but it is in a quandary because it must also keep rampant inflation from flaring up again, say experts.
With a small and relatively insulated banking sector, Vietnam was not directly exposed to the subprime crisis that sparked the Wall Street meltdown and the subsequent worldwide credit crunch and financial turmoil.
But the wider economic repercussions of what has been called the worst global economic crisis since the Great Depression are already being felt in Vietnam, especially in the crucial export sector.
Amid slackening overseas demand, Vietnam’s monthly exports have steadily fallen from US$6.5 billion (US$1 = RM3.59) in July, to US$6 billion in August,US$5.1 billion in October.
And, although it’s too early to say foreigners are pulling out of financial markets, in the past month they have been net sellers of bonds and stocks.
Inflation has been in double digits all year and stood at 26.7 per cent in October, a slight fall after a drop in global energy and commodity prices. The government’s target is to bring annual inflation down to 23-24 per cent in 2008, and to less than 15 per cent in 2009.
Aiming to reduce liquidity to fight inflation, the government had raised interest rates and bank reserve requirements several times this year. But this has also starved businesses of credit for investment and working capital, forcing the central bank to reverse its monetary policy as both local and international factors have slowed economic growth in Vietnam.
A farmer throws a net to catch fish on a flooded paddy field in Phuong My village, 25 km (16 miles) outside Hanoi November 12, 2008. Hanoi reported 22 deaths from the worst inundations in more than three decades, officials said.REUTERS/Kham (VIETNAM)
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