Illustrative image (Source: VNA)The bank’s October report, Vietnam Macro Monitoring,shows that industrial production and retail sales posted another month of highgrowth rates (13.0% and 36.1% year-on-year) which could be attributed both tostrong economic activities and to the low-base effects.
Both exports and imports growth moderated in September due to weakening demand from majorexport markets. FDI commitment fell in September, affected by the heighteduncertainty about the global economic prospects while FDI disbursementcontinued to improve, the report says.
Despite softening energy prices, CPI inflationaccelerated from 2.9% in August to 3.9% in September largely due to highereducation costs and rents. Core CPI inflation accelerated as well, from 3.1% inAugust to 3.8% in September. The terms of trade deterioration eased in thethird quarter compared to the previous three months.
Credit growth accelerated from 16.2% in August to 17.2%in September as the State Bank of Vietnam (SBV) raised credit growth limits onsome commercial banks.
With strong demand for credit, average overnightinterbank interest rate rose from 3.5% in August, reaching 5.48% inmid-October, the highest since 2013.
The Vietnamese dong continued to depreciate against astrengthening US dollar in September (1% month-on-month and 3.8% year-on-year).To stabilise the domestic currency, the SBV raised two key policy interestrates and the cap on key short-term rates on deposits denominated in localcurrency by 100 basis points, the first rate hike since April 2020. The budgetbalance posted a 0.5 billion USD deficit in September for the first time in 2022,but still registered a 10.5 billion USD surplus over the first 9 months of theyear. Given the budget surplus, year-to-date government bond issuance reachedonly 28.7 % of annual plan, compared to 67.9% in 2021.
According to the report, while the economic recoveryhas remained strong, heightened uncertainties related to the slowing globaleconomy, rising domestic inflation, and tightening global financial conditionswarrant increased vigilance and policy agility.
Given the economy has not fully recovered and growthin main export markets is expected to slow, continued active fiscal policy tosupport the economy should be closely aligned with economic outcomes andcoordinated with monetary policy.
At the same time, as CPI and Core CPI are reaching 4%– the policy rate set by the authorities – monetary authorities should be readyto consider further tightening of monetary policy to ensure inflation remainsanchored.
Given the end of forbearance and tightening financialconditions, the financial sector faces heightened risks and prompt SBV guidancewould help stem materialisation of such risks at the sector level, potentiallyaffecting the real economy. /.
VNA
