Vietnam economy plagued by imbalances

HANOI, Mar 24, 2011. Vietnam’s inflation rate accelerated and its trade deficit widened in March, showing that imbalances continue to plague the economy and will keep up pressure on its ailing currency.

Consumer prices surged 13.89% in March from a year earlier, the fastest on-year pace since February 2009, the General Statistics Office said Thursday, making it increasingly difficult for authorities to cap this year’s inflation rate at 7% despite recently switching their focus from fostering growth to taming price pressures.

At the same time, Vietnam’s persistently high trade deficit widened to $1.15 billion in March from a revised $1.11 billion a month earlier, said the deputy minister of industry and trade, Nguyen Thanh Bien.

Exports in March rose to $7.05 billion from $4.85 billion in February, while imports increased to $8.2 billion from $5.96 billion, he said, adding that for the first quarter, Vietnam’s exports rose 34% from a year earlier to $19.25 billion, while imports rose 24% to $22.27 billion.

The trade deficit for the quarter was $3.029 billion, narrower than a deficit of $3.43 billion in the same period last year.

The General Statistics Office is expected to officially release trade data for March later this week or early next week, along with revised trade data for February.

The worsening data comes after the government last month decided to alter its policy of focusing on growth, finally giving in to mounting pressure to produce policies that may help guide the economy back to a healthier position.

The government will follow “a tight and prudent monetary policy” while “reducing public investment and… containing the trade deficit” to ensure social security and stable growth, Deputy Prime Minister Nguyen Sinh Hung told the National Assembly on Monday.

After months of concern from investors and economists, strong policy action began only in February when the State Bank of Vietnam announced the country’s largest currency devaluation in years, a 9.3 percent adjustment whose scale surprised experts.

The government then proclaimed fighting inflation to be its number one priority, raised key interest rates and set a series of targets to help stabilise the economy.

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