Vietnam's inflation rate eases slightly

Nov 25, 2008, 11:18 GMT

Hanoi - Inflation in Vietnam eased slightly last month, but consumer prices were still 23.25 per cent higher compared to a year ago, the government said Tuesday.

In its monthly report posted on its website, the state-run General Statistics Office said that food prices were up 49.7 per cent. The cost of housing and construction materials rose slower at 21.67 per cent when compared to November 2007.

The government estimates that the Consumer Price Index fell 0.76 per cent in November compared to October - the second consecutive monthly decline.

The Communist government has struggled to reign in inflation since it started moving into the double digits early last year. Inflation, which hit a high of 27.9 per cent in September, was partly blamed on state-owned enterprises, which were borrowing money at cheap rates and spending wildly.

In an effort to tighten the money supply, the central bank raised interest rates three times. Vietnam Prime Minister Nguyen Tan Dung ordered state spending cut by at least 10 per cent, suspending unnecessary infrastructure projects.

Economists welcomed the move to control spending, but many criticized the efforts as too little too late.

At one point, food prices were more than 60 per cent higher than last year. Because the poor spend a larger proportion of their budgets on food, they were hit particularly hard.

The new fear is that the global economic slowdown is going to hit Vietnam's large export-dependent industries. Foreign buyers are already cutting back orders on the fear that their customers will have less money to spend.

This week, the State Bank of Vietnam lowered its benchmark interest rate to 11 per cent, hoping to revive the economy and encourage businesses to expand. It was the third reduction in interest rates in the past 30 days.

Because of the dismal global outlook as well as troubles at home, the government recently revised downward its estimates for economic growth. Last year, the economy grew at 8.5 per cent, however this year the annual growth is estimated to grow at just 6.7 per cent.