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Vietnam's Q1 GDP growth to quicken, inflation ease in 2015

[HANOI] Vietnam's economic growth will quicken to an annual rate of 5.4 percent in the first quarter ending March, a government think tank forecast on Monday. "This trend will continue in the following quarters and the growth target of 6.2 pe rcent for the whole of 2015 is feasible,"the National Financial Supervisory Commission said in a report, echoing a government forecast of economic growth for the year.

Monday's forecast compares with gross domestic product growth of 5.06 per cent in the first quarter of 2014 from a year before, government data showed.

Vietnam's US$184 billion economy will get more exposure as the Southeast Asian nation gears up to sign a slew of international trade deals expected this year, while it is still battling bad debt and the inefficiency of the state sector.

Annual average inflation would slow to 3 per cent this year due to low oil prices, the commission said, citing slowing core inflation in December 2014, and also taking into account average inflation declining in recent years.

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Core inflation in December, which excludes the price of food, essential goods and public services, stood at around 3 per cent, while the country's average inflation last year slowed to 4.09 per cent from 6.6 per cent in 2013.

Vietnam's economy this year is expected to face risks such as subdued demand, deflation and debt, Hong Kong-based HSBC economist Trinh Nguyen said in a report on Monday. "Excess supply of oil and other commodities, sluggish global demand, rapid currency devaluation, and a fragile domestic recovery make nominal growth a complicated business in Vietnam, especially for an increasingly trade-oriented economy," she said.

Vietnam's export growth slowed to 13.6 per cent in 2014 from 15.2 per cent the previous year and 18.2 per cent in 2012, mostly due to lower volumes of crude oil, coal, rice and rubber.

Consumer prices contracted 0.2 per cent per month in the past five months, mostly due to cheaper oil prices while "service costs and higher credit growth will likely put some upward pressure on prices, albeit gently," the report said. "Should inflation continue to fall, the economy may not grow nominally fast enough to service its widening fiscal deficit,"the HSBC report said, adding that oil export revenues were set to decline in 2015.

HSBC forecast the economy will grow 5.9 per cent in the first quarter from a year earlier and 6.1 per cent for 2015.