Vietnam growth holds strong but inflation is the problem

Vietnam is the first Asian country to report GDP data and the latest figures, released today, showed that the economy expanded 5.8% y/y in Q1. The economic upswing will probably strengthen during the course of 2010 while foreign reserves should rise. But inflation looks set to accelerate as well and central bank policy rates need to move up soon. Vietnam is on negative watch (from Fitch) and a debt rating downgrade is likely by around mid-2010 if policy rates stay at current levels throughout Q2.

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