The slow easing of inflation and improving external finances are building on the initial progress of last year, indicating that Resolution 11 is gradually paying off. Meanwhile, a cooling economy and better trade position are helping stabilise the exchange rate, and a more stable dong can provide additional help in containing inflation.

Although official Vietnamese foreign exchange reserve data are not regularly updated, 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 also builds on the increase in official reserves to US$15.2 billion at end-September, from US$12 billion at the beginning of the year.

We rate Vietnam ‘B+’ with a Stable Outlook. Due to the risks from inflation, which remains 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 Vietnam.

Vietnam’s trade deficit for January and February totalled US$628 million, the General Statistical Office said on Monday, down from US$1.989 billionin the same period last year.

The consumer price index rose 16.4 percent year-on-year in February, down from 17.3 percent in January. Resolution 11 is a package of measures, including cutting credit growth and broad money growth, adopted a year ago to help cool the overheating economy.

Source: vnagency.com.vn