Viet Nam Inflation Slowed in June, Prime Minister Says

Vietnam's inflation rate slowed this month and the government will bring the pace of year-on-year consumer price increases to below 10% by 2010 from 25% now, Prime Minister Nguyen Tan Dung said.

``Thanks to the strong measures inflation has been reduced,'' Dung, 58, said in an interview from Washington following meetings with President George W. Bush and former U.S. Federal Reserve Chairman Alan Greenspan. The pace ``will be brought down to a one-digit figure in 2009 or early 2010.''

Vietnam's central bank increased interest rates three times this year and this month raised the benchmark rate to 14%, the highest in Asia, from 12%. The State Bank of Viet Nam also devalued the dong by 2% this month to ease pressure on the currency.

Concern the government's measures to cool price increases have been ineffective roiled the Southeast Asian nation's financial markets, sending the benchmark stock index down 58% this year. Morgan Stanley said last month that Viet Nam may be headed for a ``currency crisis.''

``There have been difficulties in the financial and capital markets,'' said Dung. ``The economy also is exposed to the shortcomings and weaknesses'' of the global economy, he added, speaking via a translator.

Dung said the inflation rate for June would be ``about 50% lower than May's figure.'' Consumer prices increased 3.9% in May from the previous month. The General Statistics Office in Hanoi is expected to release figures for June this week.

The VN-Index of stocks has rose 8.64, or 2.3%, to 392.42 at 9:10 a.m. in Hanoi, extending gains this week to more than 7%.

Consumer Prices

Dung, who became prime minister two years ago, said that the country's ``top priority'' now is to slow inflation. The government on June 3 cut the economic growth target for this year to 7% from 9%.

Vietnam's inflation situation ``is totally out of control,'' Tom Cooley, Dean of New York University's Stern School of Business, said in an interview from Tokyo. ``They are going to face very painful choices as a result of letting it get that far out of control.''

The economy grew 6.7% in the first half of the year, Dung said today, after expanding 7.9% in the same period last year. Growth for all of 2007 was 8.5%, the fastest in more than a decade.

``In 2008, we also face of the problem of the increasing prices of commodities and high inflation in the world,'' Dung said. ``That is the reality. The Vietnamese economy is now very closely linked to the world economy.''

World Economy

The U.S. lifted a trade embargo against Viet Nam in 1994 and resumed diplomatic relations in 1995, two decades after the end of the war. Vietnam in January 2007 became the 150th member of the World Trade Organization and a year later joined the United Nations Security Council.

Greenspan, who was chairman of the Federal Reserve from 1987 to 2006, ``advised Viet Nam to get prepared for the further changes and volatility in the world,'' Dung said.

``If the global and U.S. economy continue to slow down and oil prices will continue to increase, Viet Nam needs to have a solution to be prepared for that situation,'' Dung said.

``We are starting to see an improvement in inflation, but that's not to say this will be something that will be over and done with in a very short period,'' said Michael Pease, Hanoi- based general director of Ford Motor Co. in Viet Nam, which has invested $100 million in a car assembly plant near Hanoi.

In his meeting with Bush, Viet Nam agreed to a bilateral investment treaty with the U.S., ``which will help promote cross- border investment by significantly strengthening the legal protections'' under a trade agreement signed seven years ago, according to a release yesterday from the Department of State. (Bloomberg)