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