HSBC report confirms Vietnam’s economic balance

August 06, 2012 | 16:44

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Vietnam has successfully ensured an economic balance, bringing down inflation and initiating much needed reforms, according to a report by the Hong Kong-Shanghai Banking Corporation (HSBC) on August 2.

The HSBC report on Vietnam’s macro economy and future prospects for the Vietnamese market said that in July, inflation has slowed to 5 percent, back from its peak of 23 percent in 2011. The trade deficit has also narrowed to US$58 million from US$6 billion a year earlier and foreign exchange reserves risen.

However, a sluggish consumer demand has resulted in a slowdown in manufacturing in July, suggesting that another rate cut is coming soon, said the report.

According to HSBC, policymakers in Vietnam have indicated that they are willing to take the necessary measures to move the economy forward, after moves were made last year to reduce the rising credit growth rate.

The Government also recently passed several resolutions to increase the efficiency of State-owned enterprises (SOEs) as well as the banking sector, stated the report.

However, more remains to be done, including slowing down the credit growth and reducing Vietnam’s dependence on credit to sustain growth.

Vietnamese businesses are suffering from both low domestic demand and weak global growth. Cautious spending, from both corporations and consumers, and a falling inflation rate suggest that the State Bank of Vietnam will step up its policy of easing.