Be ready to further monetary tightening: WB to Vietnam

Vietnam should be "ready to consider further tightening of monetary policy" to ensure inflation remains anchored amidst its strong economic recovery and global uncertainties, says the World Bank.

In its October edition of Vietnam Macro Monitoring, the bank noted the country's consumer price index (CPI), a gauge to measure inflation, is approaching the authorities’ target of 4%, after accelerating from 2.9% in August to 3.9% in September. Core CPI also moved in tandem as it increased from 3.1% in August to 3.8% in September.

It noted the inflation was largely due to higher education costs and rents, although energy prices eased.

"Given the economy has not fully recovered and growth in main export markets is expected to slow, continued active fiscal policy to support the economy should be closely aligned with economic outcomes and coordinated with monetary policy," the report said.

The World Bank listed Vietnam’s economic achievements, including a strong GDP growth of 13.7% in the third quarter of this year, or 8.83% year-on-year in the first nine months. The economic performance was bolstered by pacey growth of industrial production and retail sales, at 13% and 36.1% in Q3, respectively.

It also emphasized the need for increased transparency in the banking sector given the turmoil around the Saigon Commercial Bank (SCB) case.

The case "highlights the need for increased transparency through timely publication of detailed information about the banking sector performance, an enhanced corporate governance, a strengthened risk-based supervision, including supervision of business groups and related party lending and early intervention, and an enhanced bank resolution framework," the institution added.

On October 7-8, many SCB branches and transaction offices recorded a run on deposits due to fears about the bank’s financial health. One week later, the State Bank of Vietnam announced it had placed this private bank under special control over stability concerns.