December 20, 2012 / 2:21 AM / 5 years ago

UPDATE 2-Vietnam says has enough room to cut interest rates

* Easing inflation gives more leeway to cut rates, says PM

* Inflation seen at 7 pct this year, down from earlier govt f’cast

* Dong lending, deposit rates to ease - BIDV Securities (Adds brokerage comments on rates, credit growth)

HANOI, Dec 20 (Reuters) - Vietnam has sufficient ground to lower interest rates as inflation has been easing in recent months, Prime Minister Nguyen Tan Dung was quoted as saying by a state-run newspaper on Thursday.

Inflation last month eased to a rate of 0.47 percent against October, from a monthly rise of 0.85 percent the previous month and 2.2 percent in September, the Vietnam Economic Times newspaper quoted Dung, who cited government data.

“Inflation is slowing as such, the ground is sufficient to lower interest rates,” he said on Wednesday.

Full-year inflation will be around 7 percent in 2012, below the government’s previous estimate of 7.5 percent, the newspaper said, citing a Planning and Investment Ministry report.

While Vietnam’s economy is slowing this year, banks have ample funds and the central bank has been withdrawing cash from the system. Businesses say they cannot access loans due to high rates and also because banks want to avoid bad debt.

Bankers and businesses have been expecting the central bank to lower by 1 percentage point the cap on dong deposits, which has been unchanged at 9 percent since November 2010.

Dong lending rates at banks are around 13-15 percent per annum while businesses say they are charged at up to 17 percent.

Lending rates were expected to ease to between 12-15 percent while deposit rates would be at 8-9 percent, BIDV Securities said in a note to clients.

Vietnam’s credit growth this year would be 6.0-6.2 percent, picking up from an annual rise of 5.4 percent at the end of November, the brokerage said, well below the initial central bank target of a rise of 15-17 percent.

Reporting by Hanoi Newsroom; Editing by Jacqueline Wong

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