Bangkok--11 Jun--Standard & Poor's
Vietnam's recent history of high and variable inflation is limiting its policy response to this economic downturn, according to a report that Standard & Poor's Ratings Services released today, titled "Ghost Of Inflation Past Haunts Vietnam's Policy Makers."
"We believe that the high inflation expectation of households and business in Vietnam are constraining the government's current efforts to provide support for economic growth through easing fiscal and monetary policy," said Standard & Poor's credit analyst Kim Eng Tan. "It is uncertain if the government is willing to act to keep inflation low."
Vietnam's large fiscal stimulus package has led to some concerns over higher inflation in the next year or two. Even if Vietnam has the will, the experience elsewhere suggests that inflation expectations take time to bring down.
"A marked decline in inflation expectations certainly seems unlikely to come in time to improve policy effectiveness in the current economic slowdown. In the foreseeable future, therefore, the lack of monetary flexibility will remain a weakness. Together with the still-developing commercial banking system, we consider that this poses the most significant risks to the government's creditworthiness," said Mr. Tan.
The article examines the legacy of high inflation expectations in Vietnam, and the impact of the government's monetary-easing and fiscal stimulus measures.
The article is available to RatingsDirect subscribers at www.ratingsdirect.com. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-9823 or sending an e-mail to [email protected]. Ratings information can also be found on Standard & Poor's public Web site at www.standardandpoors.com; under Ratings in the left navigation bar, select Find a Rating. Members of the media may request a copy of this article by contacting Michelle Lei at (8610) 6569-2961 or mailto:[email protected].
Media Contact:
Mimi Barker, New York (1) 212.438.5054, [email protected]
Analyst Contacts:
KimEng Tan, Singapore (65) 6239.6350
Elena Okorotchenko, Singapore (65) 6239.6375
Key Contacts:
Americas Media Relations: (1) 212-438-6667
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