Vietnam Roundup: Dollar Bond, Fast Growth and Low Inflation
December 29, 2014
Vietnam is studying the possibility of raising more money from selling dollar-denominated bonds to the international market, writes WSJ’s AnhThu Nguyen. “We are looking into the market and see if there is demand there, but no detailed bond selling plan is available,” a senior finance ministry official says.
State media cited Finance Minister Dinh Tien Dung as saying this week that the country is considering raising $1 billion from selling 10-year sovereign bonds. Vietnam in November raised $1 billion via an issue of sovereign bonds at an annual coupon of 4.8%, with bids from foreign investors totaling $10.6 billion.
The bond plans come against a backdrop of growth that is strong but of questionable sustainability. WSJ’s Vu-Trong Khanh reports that Le Tham Duong, an economist with the Banking University of Ho Chi Minh City, says Vietnam’s economy is recovering but not yet in any kind of sustainable way. “Aggregate demand remains weak, while growth is relying heavily on exports by foreign firms operating in the country,” Duong says.
State Bank of Vietnam Governor Nguyen Van Binh said on Wednesday that this year’s economic growth will likely be 5.93%, beating the government’s initial target of 5.8% and higher than last year’s 5.42% expansion.
Duong says 2015 will be another challenging year for Vietnam, given that the country hasn’t found an effective way to clean up bad debt in the banking system, while investor and consumer sentiment remains weak.
One encouraging development is that Vietnam’s low inflation may give room for the central bank to further ease its monetary policy to support economic growth. According to Nguyen Duc Thang, head of the General Statistics Office’s department of prices, “Lower deposit and loan interest rates will encourage domestic consumption and hence give a boost to production.”
Data released on Wednesday by the General Statistics Office showed that inflation is at 1.84% this year, the lowest level in decades. The GSO says lower oil prices have led to declines in transport costs and the prices of other products.