Vietnam PM calls for looser monetary policies to fuel growth

HANOI (Reuters) – Vietnamese Prime Minister Pham Minh Chinh on Tuesday asked the central bank to shift from stable monetary policies to “more flexible, loosening” ones as the manufacturing-led economy grapples with tepid growth amid a global demand downturn.

Strength in the services sector helped the Southeast Asian country post faster economic growth in the second quarter, official data showed, but the country still found it challenging to achieve its growth target of 6%-6.5% as trade stayed weak.

“The State Bank of Vietnam has already adjusted the monetary policies but needs to make more effort,” Chinh said in a statement released after a government meeting.

The adjustments will help promote business recovery by easing obstacles around liquidity and credit for companies, he said.

In an attempt to prop up growth, Vietnam has reduced its interest rates four times so far this year – in sharp contrast to major world economies that have been on a hiking spree. Its lawmakers also extended a cut in value added tax.

Capital Economics in a note last week revised down its forecast for Vietnam’s GDP growth to 4.5% for this year, from 5.0%, and forecast that the country would cut its policy rates by 100 basis points by the end of this year.

(Reporting by Phuong Nguyen; Editing by Devika Syamnath)