Vietnamese inflation lowest in eight months

HANOI (AFP) - Vietnamese inflation slowed to its weakest pace in eight months in May, official data showed Friday, in the latest sign that the communist-run economy is cooling.

Consumer prices rose 6.36 per cent year-on-year in May, the Government Statistics Office said, slightly down from a 6.61 per cent increase reported in April.

Economists attribute the slowdown in inflation to past monetary policy tightening and an easing of demand from domestic consumers.

Communist Vietnam is struggling with a host of economic woes, including slow Gross Domestic Product growth, sluggish domestic demand, a banking sector weighed down with high levels of toxic debt and record numbers of bankruptcies.

"There is a big risk of inflation pressure and unstable macro-economic developments," the government said Monday, in a report to the country's National Assembly.

"Bad debts... remain at a high level, while it is difficult for enterprises to obtain loans," the report added.

In 2011, Vietnam repeatedly raised interest rates to prevent the economy from overheating and to rein in double-digit inflation, but with the economy weakening the authorities last year resumed stimulus efforts.

Vietnam cut interest rates in May for the eighth time in little more than a year, in a bid to spur bank lending and boost consumption after economic growth fell to a 13-year low of 5.03 per cent in 2012.

The country's GDP in the first quarter of the year grew by 4.89 per cent from a year earlier, below expectations and prompting the government to admit there were many "shortcomings and weakness" in the economy.