Vietnam looks to raise public debt ceiling to spur growth and expects 2021 inflation to stay at 4%

Vietnam is considering a raising of the ceiling on its public debt from the current level of 60% of gross domestic product to shore up an economy hit by the coronavirus, its investment minister has announced.

« If not raising the ceiling, there will not be sufficient resources for growth, » Nguyen Chi Dung told the National Assembly.

Vietnam’s GDP contracted 6.17% in the third quarter of 2021 from a year earlier as pandemic restrictions hit, the sharpest quarterly decline on record.

« We are still calculating on how much the ceiling should be raised, » Dung said. « If raised too high, it would lead to macroeconomic instability. »

The southeast Asian country, which has set a growth target of 6.5% for this year, will likely see upward pressure on inflation, its central bank governor Nguyen Thi Hong told lawmakers.

« The country is facing upward pressure on inflation in 2022 on external factors as Vietnam is an open economy, » Hong said.

That scenario would mean the central bank may not rely on further easing its monetary policy to boost economic growth.

Hong said this year’s inflation is seen below 4%, as targeted by the assembly.

Vietnam had successfully contained coronavirus outbreaks until the middle of this year, but a wave of infections in Ho Chi Minh City and nearby industrialised areas led to movement curbs that hit the economy hard.

Total coronavirus infections hit 1 million on Thursday, with 22,800 deaths recorded.

Meanwhile, Vietnam’s inflation can be kept below 4% this year, in line with a target set earlier by the National Assembly, the country’s lawmaking body, its central bank governor has announced.

« However, the country is facing upward pressure on inflation in 2022 on external factors as Vietnam is an open economy, » Nguyen Thi Hong told lawmakers at a meeting in Hanoi.

Reuters – November 14, 2021