Vietnam is set to lean towards expansionary fiscal policies to meet its ambitious economic growth target, according to Deputy Central Bank Governor Pham Thanh Ha. With limited room for monetary policy adjustments, the focus will shift to fiscal measures to ensure stability and growth.

Economic Targets and Challenges

The Vietnamese government has set a target of at least 10% GDP growth for the year, while aiming to keep inflation at 4.5%. However, recent economic indicators show challenges ahead, with inflation accelerating and the trade deficit reaching a record high in May. The ongoing conflict in Iran has also impacted the Southeast Asian nation’s economy.

Ha emphasized the importance of maintaining macroeconomic stability and controlling inflation, stating that fiscal policy should play a pivotal role in promoting sustainable growth. This approach marks a strategic shift as Vietnam often relies on expanding credit to drive economic growth.

Monetary Policy Constraints

As of April 21, total bank lending had increased by 3.83% from the end of the previous year. Despite this growth, the central bank recognizes the narrowing scope for further monetary policy interventions. Vietnam has set a credit growth target of 15% for the year, but the focus will now be on targeted fiscal measures to support the economy.

Ha’s comments highlight the government’s commitment to balancing growth with stability, ensuring that short-term gains do not come at the expense of long-term economic health. This approach aligns with Vietnam’s broader strategy of fostering high and sustainable growth through prudent fiscal management.

Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.