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Fitch lauds nation's measures to cool overheating economy

Update: February, 29/2012 - 10:48


Workers of Nam Dinh Textile and Garment Co make clothes for export . Fitch Ratings suggests that Viet Nam needs to strengthen its commitment to budget cuts to maintain its economic stability. — VNA/VNS Photo Danh Lam
HA NOI — Easing inflation and improvements in the trade balance suggest that Viet Nam's economy is stabilising, but authorities need to double their commitment to the "Resolution 11" policies to maintain this progress, Fitch Ratings has said.

Resolution 11 is a package of measures adopted a year ago to help cool the overheating economy, which cut credit growth and encouraged broad money growth.

The global rating agency said the drop in inflation and strength of external finances indicated that Resolution 11 was gradually paying off. A cooling economy and improved trade position were helping stabilise the exchange rate, and a more stable Vietnamese dong could provide additional help in containing inflation.

There is a strong possibility that the smaller trade deficit means the country's FX reserves remain fairly healthy, lessening the risk of a balance-of-payments crisis. This probable result would also build on the increase in official reserves to US$15.2 billion at the end of September, from $12 billion at the beginning of the year.

"We rate Viet Nam ‘B+' with a Stable Outlook. Due to the risks from inflation, which remain very high relative to GDP growth, and the challenges of cooling an economy that has been overheated since 2008, we will continue to monitor the implementation and results of the Resolution 11 policies closely in our assessment of Viet Nam," Fitch Ratings said on its website.

Viet Nam's trade deficit for January and February totalled $628 million, the General Statistics Office said, down from nearly $1.99 billion in the same period last year. The consumer price index (CPI) rose 16.4 per cent year-on-year in February, down from 17.3 per cent in January. — VNS

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