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The Vietnam News

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Vietnam sees 2005 inflation at 7.5-8.0 pct

HANOI- Vietnam will miss its target of keeping inflation to 6.5 percent this year, the central bank said on Thursday, and Prime Minister Phan Van Khai told his cabinet to work out plans to control prices in the next five years. "Inflation this year will be between 7.5 percent and 8.0 percent," Le Xuan Nghia, director of the central bank's Banking Development Strategy Department, told the state-run Voice of Vietnam radio. Inflation was 9.5 percent last year.

The government said the consumer price index in August was already 6.0 percent higher than December, due mainly to the steep rise in global oil prices. "The situation with prices is the biggest concern in our country now," Thursday's state-run Tuoi Tre newspaper quoted Khai as telling a cabinet meeting. "Ministries and government agencies shall therefore continue to work out comprehensive solutions on prices for the next five years," he was quoted as saying.

In May, the International Monetary Fund raised its 2005 inflation forecast for Vietnam to 7.5 percent from 7.0 percent estimated in March. Nghia said the economic growth target, set at 8.5 percent this year, had put pressure on banks as construction of major infrastructure projects such as the $2.3 billion Son La hydro power plant would require huge bank loans. The central bank has allowed banks to raise the interest rate ceiling on dollar deposits of institutional customers by between 0.2 and 0.5 of a percentage point, its second rise this year.

Central bank governor Le Duc Thuy has said Vietnam could also miss its economic growth target because of high oil prices. Vietnam's GDP was 7.63 percent bigger in the first half of this year than the first six months of 2004 and the government has ordered all agencies to strive for a growth of 9.3 percent in the second half in an attempt to reach the full-year target.

Reuters - September 01, 2005.