Vietnam needs to tackle inflation head-on: IMF

Vietnam's inflation is "still pretty high", and the central bank needs to address the problem head-on so that it does not have to tighten much faster later, said the International Monetary Fund (IMF).

Krishna Srinivasan, director of the IMF’s Asian and Pacific Department, mentioned Vietnamese efforts to curb inflation at a press conference in Washington D.C. on Friday (Vietnam time).

“When it comes to the monetary policy stance, Vietnam is trying to do this balance between trying to support growth and combating inflation and addressing pressures in the real estate sector.

“We see inflation as still being pretty high,” he noted. “And so, it's important that the central bank addressed that problem of inflation head-on so that you don't have to tighten much faster later. If you lose it now, it can have a bearing on expectation and so on. So, I think it's important for Vietnam to address inflation head-on.”

In late December, the State Bank of Vietnam’s Deputy Governor Dao Minh Tu said the central bank would manage monetary policy in a flexible way to keep inflation at 4.5% in 2023 as the National Assembly had targeted.

The Southeast Asian country, a new global manufacturing hub, recorded a 3.15% inflation rate for 2022.

At Friday’s press conference, when asked about the growth prospects for ASEAN overall, the IMF’s Srinivasan said: “There are two sets of factors at play here. One is slowing growth in the U.S. and Europe because ASEAN countries do export quite a bit to the U.S. and Europe. That is a headwind.

“At the same time, China is opening up, so there’s a tailwind. You put the factors together, on balance, we see improvement in our ASEAN’s growth outlook.”

The IMF regional director noted that [post-pandemic] normalization of supply chains in China will help ASEAN. “The linkages between ASEAN and trade and China are important,” he said, referring to the reason.

Asked about external debt in Laos, Srinivasan stressed the importance of the Lao government raising revenues for a “credible and well-fleshed short, medium-term fiscal framework that can help reduce debt.”

“Now, going beyond that, we’ve also been informed by the authorities that they’re engaging with the creditors on some kind of debt treatment. We are not privy to that. But again, that's something which could also help address the debt issue.”

Vietnam’s GDP growth might slow down to 5.8% in 2023 and then rebound to 6.9% in 2024, among the highest figures in Asia, the IMF said Wednesday.