More Tightening Needed Despite Credit Squeeze

We expect tighter monetary conditions to slow growth over 2010 as inflation enters into double digits in Q210. While decelerating food price growth may hold back inflation in the short term, the effects of abundant liquidity and higher import prices are evident in other goods categories. We thus maintain our forecast for inflation to average 10.5% in 2010 and we expect the State Bank of Vietnam to follow up the removal of the cap on lending rates in early March with a tightening of the benchmark base rate beginning in Q210.

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