Vietnam looks to raise public debt ceiling to spur growth

[HANOI] Vietnam is considering a raising of the ceiling on its public debt from the current level of 60 per cent of gross domestic product to shore up an economy hit by the coronavirus, its investment minister said on Friday (Nov 12).

"If not raising the ceiling, there will not be sufficient resources for growth," Nguyen Chi Dung told the National Assembly.

Vietnam's GDP contracted 6.17 per cent in the third quarter of 2021 from a year earlier as pandemic restrictions hit, the sharpest quarterly decline on record.

"We are still calculating on how much the ceiling should be raised," Dung said. "If raised too high, it would lead to macroeconomic instability."

The South-east Asian country, which has set a growth target of 6.5 per cent for this year, will likely see upward pressure on inflation, its central bank governor Nguyen Thi Hong told lawmakers.

"The country is facing upward pressure on inflation in 2022 on external factors as Vietnam is an open economy," Hong said.

That scenario would mean the central bank may not rely on further easing its monetary policy to boost economic growth.

Hong said this year's inflation is seen below 4 per cent, as targeted by the assembly.

Vietnam had successfully contained coronavirus outbreaks until the middle of this year, but a wave of infections in Ho Chi Minh City and nearby industrialised areas led to movement curbs that hit the economy hard.

Total coronavirus infections hit 1 million on Thursday, with 22,800 deaths recorded.

REUTERS