Vietnam Central Bank Warns on Inflation, Acts to Stabilize Dong

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(Bloomberg) — The State Bank of Vietnam warned that inflationary pressures are likely to remain elevated throughout the year and said it has taken steps to ensure liquidity in the banking system and stabilize the dong amid global economic uncertainty.

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Geopolitical tensions, particularly the military conflict in the Middle East, have had a significant impact on an economy as highly open as Vietnam, Deputy Governor Pham Thanh Ha said at a briefing in Hanoi on Thursday.

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“The SBV has had to carefully balance multiple objectives, focusing on inflation control and supporting economic growth, while at the same time minimizing the adverse effects of external shocks on macroeconomic stability,” Ha said.

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The central bank has the critical task of supporting one of Asia’s fastest-growing economies while maintaining currency stability, containing inflation and managing rapid credit growth without fueling bad loans. 

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Bank loans rose 7.41% as of June 26 versus the end of last year, Ha said. Overall the central bank continues to maintain its 15% credit growth target for this year, though an adjustment is possible, he added. 

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Inflationary pressures are mounting after consumer prices rose 5.60% in May from a year earlier, driven in part by higher transport, services and construction material costs as global energy prices surged during the Iran conflict.

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The central bank is faced with challenges in managing monetary policy as the Middle East conflict will likely stoke inflation through 2026, said Pham Chi Quang, head of the monetary policy department.

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The government has said it needs economic growth of 11.9% in the second half of 2026 to meet its goal of double-digit growth this year. That will be a stiff task as the nation navigates an uncertain global trade picture and ongoing tensions with its biggest export market, the US, including three separate investigations.  

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In its latest assessment, the World Bank has elevated Vietnam to an upper-middle-income economy, underscoring the country’s sustained economic expansion and income gains. The country “tells a story of growth,” the report said.

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The state bank reiterated that it will continue to provide more access to loans and has told lenders to prioritize lending to growth sectors such as manufacturing.

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—With assistance from Cecilia Yap.

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