World Bank reassured by Vietnam steps toward stability

HANOI, Dec 3 (Reuters) – It is “reassuring” to see Vietnam rebalancing its economic policy toward stability, but more turbulence could be on the cards as the global economy continues to recover, the World Bank said on Thursday.

Even as monetary policy tightens, inflation is likely to see some acceleration in Vietnam in 2010, it said in a semi-annual report.

“It is reassuring to see that the government is rebalancing its objectives once again, giving more priority to stability. The decisions made between late October and early December amount to an appropriate macroeconomic framework being put in place,” it said.

Vietnam’s macroeconomic management for the past two years has so far been effective, despite having a relatively “heterodox and at times rudimentary nature”, the Bank said in its report, entitled “Taking Stock”.

Vietnam had taken a series of small steps starting in October to begin to tighten monetary policy, capped by last week’s currency devaluation and interest rate hike. The government also announced this week an end to subsidies on short-term business loans, which has been a pillar of its stimulus package.

The moves were designed to address imbalances that emerged during roughly a year of expansionary monetary and fiscal policy to counter the global economic crisis, including chronic currency weakness spurred by dollar hoarding and expectations of depreciation. (Reporting by John Ruwitch; Editing by Muralikumar Anantharaman) ((john.ruwitch@thomsonreuters.com; +84 4 3825 9623; Reuters Messaging: john.ruwitch.reuters.com@reuters.net)) ((If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com))

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