November 21, 2013 / 11:21 AM / 6 years ago

UPDATE 1-Vietnam sees 2013 inflation at decade low of 6.2 pct to 6.3 pct

* Lower inflation could boost sluggish credit growth

* Govt to issue bonds to finance development projects

* Jan-Nov foreign investment inflow up 6 pct y/y (Adds details, economist comment)

HANOI, Nov 21 (Reuters) - Vietnam’s inflation this year could beat earlier forecasts and slow to 6.2 percent to 6.3 percent, the lowest in a decade, Prime Minister Nguyen Tan Dung said on Thursday, in one of his strongest pointers yet to the revival of the troubled economy.

Dung’s latest inflation forecast for 2013 was lower than the 7 percent seen last month and a sharp fall from 9.2 percent in 2012. It would be the lowest since the 3.0 percent recorded in 2003.

Inflation has been a major hurdle in getting Vietnam’s once-promising economy back on track after a period of boom growth slowed when inflation soared as high as 23 percent in 2008, causing a damaging ripple effect on consumer spending, foreign investment and private and state enterprises.

November’s consumer price index would rise 0.4 percent from the previous month, slowing from October’s monthly increase of 0.49 percent, Dung told the National Assembly, in a televised session.

Low inflation in 2013 would allow Vietnam to raise bank credit to help speed economic growth next year, which the government has targeted to accelerate to 5.8 percent, from 5.4 percent expected this year.

The economy grew 5.25 percent in 2012, the slowest pace in 13 years in what many economists say is well below its potential, considering the pace of development, a growing population of 90 million and an emerging middle class.

Dung, a former central bank governor, has faced pressure over his handling of the economy and got a lukewarm rating from his own party’s lawmakers during Vietnam’s first-ever parliamentary confidence motion this year.


His efforts to revive the economy have been complicated by the region’s highest level of non-performing loans in the banking system, which has tightened much-needed credit and crippled tens of thousands of businesses.

In 2014 the government will issue more bonds to fund development, even though the debt, along with an expected increase in state budget spending would help widen the budget deficit next year to 5.3 percent of the gross domestic product, from 4.8 percent expected this year, Dung said.

Foreign investors would disburse an estimated $10.55 billion in the first 11 months of 2013 in Vietnam’s projects, up around 6 percent from a year ago, Dung said, without detailing the factors helping the rebound.

Exports from January to November are estimated to rise 15 percent on the year to around $120 billion, while imports in the same period could rise nearly 16 percent to $120.3 billion, he said.

The government has projected this year’s annual trade deficit at $500 million, compared with a trade surplus of $780 million in 2012.

The central bank measures were helping control inflation but Vietnam was not out of the woods yet, said Nguyen Duc Thanh, head of the Vietnam Center for Economic and Policy Research.

“When the economy is still facing many troubles, the lower inflation this year is a good sign as the central bank has been holding a very tight monetary policy,” Thanh said.

“However, it also shows that consumption demand is weaker than past years, which will make Vietnam less attractive in foreign investors’ eyes.” (Reporting by Hanoi Newsroom; Editing by Martin Petty and Clarence Fernandez)

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