(VOVworld) Vietnam’s economy in the first quarter of this year has stabilized and shows promising signs, according to a government  assessment. But, inflation control and macro-economic stabilization will continue to be top priorities given the potential risks. VOV’s Thu Hoa reports:

Vietnam's first quarter economy saw positive signs

This year, especially the first half of the year, is predicted to be a difficult time for the global economy, including Vietnam. But Vietnam’s first quarter economic performance was positive with slowing inflation. The Consumer Price Index (CPI) increased 1%, 1.37% and 0.16% in January, February and March, the slowest rate of inflation in 2 years. Vietnam’s import surplus stood at 300 million USD, 1.2% of the total import-export turnover, the lowest level in recent years. The quality of Foreign Direct Investment (FDI) has improved. In the first two months of 2012, Vietnam’s foreign reserves rose 20% and exchange rates remained stable. Bank liquidity improved with the issuance of government bonds up more than 10%.  Deputy Minister of Planning and Investment Cao Viet Sinh told VOV: “We think the macro-economy has stabilized. It’s important that the people’s confidence in the Vietnamese dong has risen. In the 6 months from last September to March of this year, this confidence was consolidated. Despite falling interest rates, the people have continued to deposit their money in the banks, so the liquidity of many banks is better”.

Vietnam’s yearly target of single digit inflation has been backed up by the renewed commitment of political leaders, prudent and flexible monetary policies, tightened pubic investment, growth model revision, a large workforce and enhanced national prestige worldwide. Based on the first quarter’s results, economists forecast that Vietnam’s economy will grow by 6 or 6.5% this year.

But difficulties lie ahead, including high inventories, business failure and inflation pressure. These will require the government to restructure and tighten public investment to rein in inflation. Deputy Minister Sinh says the government has issued decree 1792 on re-listing pubic projects for the year: “We haven’t paid due attention to project progress. When a project goes overtime, investment efficiency suffers. This year, we only give permits to projects that can be completed on time. Previously, provincial heads and ministers were authorized to approve investment in projects. Now the Ministries of Finance and Planning and Investment have to consider how much money the central government can provide, 20 or 30%, and the local governments must handle the rest. If they can’t, the project won’t be approved.”

Economists say a ceiling lending interest rate should be established at 15% or 16% and that flexible monetary policies should be maintained to harmonize the targets of inflation control and economic growth.