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Vietnam inflation slows as economy cools down

HANOI -- Vietnamese inflation has eased to a single-digit figure for the first time in a year, official data showed Thursday, in the latest sign of an economic slowdown in the communist state.

Consumer prices were up 8.34 percent year-on-year in May, after a gain of 10.54 percent in April, according to the General Statistics Office.

Inflation hit 23 percent in August, forcing the government to repeatedly tighten monetary policy in an effort to prevent the economy overheating.

The sharp slowdown in prices is the result of a string of interest rate rises and weak demand for Vietnam's goods and services, said Vu Dinh Anh, deputy director of the state-backed Institute of Economy and Finance.

“We can see clearly here signs of a slowdown in growth,” he added.

Vietnam's economic growth weakened to 4 percent in the first quarter of 2012 — the lowest in three years.

In response, the authorities have reversed course, slashing key interest rates by 200 basis points since March in a bid to stimulate the economy and give struggling businesses a boost.

There are “signs of economic recession... with many enterprises, especially small and medium sized in difficulties,” Deputy Prime Minister Nguyen Xuan Phuc said at the opening of the National Assembly on Monday.

In the first four months of the year, more than 17,700 businesses have gone bankrupt, a 9.5 percent rise on last year, he said.

Phuc said the focus in the months ahead would be on “curbing inflation and ensuring macro-economic stability to create foundation for sustainable growth.”

The single digit rise in prices this month should not be seen as a sign that inflation was under control, said Nguyen Xuan Thanh, director of the public policy program at the Fulbright School in Ho Chi Minh City.

“The concern is that this low inflation number will make the government think now is the time to aggressively loosen monetary and fiscal policy ... but you have to consistently control inflation,” he said.

Vietnam's economy grew 5.9 percent last year, just below the six percent target. The government is aiming for a 6-6.5 percent expansion this year.

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