Vietnam is contemplating increasing the ceiling on its public debt from the current 60% of GDP to bolster the economy battered by the coronavirus, according to the country’s investment minister.

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

Vietnam’s GDP slumped 6.17% in Q3 this year compared to the year before due to the impact of the pandemic restrictions, the steepest quarterly decline on record.

Dung added: "We are still calculating on how much the ceiling should be raised. If raised too high, it would lead to macroeconomic instability."
With a set growth target of 6.5% for this year, Vietnam will likely see upward pressure on inflation, the governor of the country’s central bank told, 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 stated.

Such a scenario would signal the central bank may not rely on additional monetary policy easing to improve economic growth. Hong added that 2021 inflation is seen under 4%, as targeted by the assembly.

Covid outbreaks had been successfully contained until the middle of this year, but a wave of infections in Ho Chi Minh City and nearby industrialised areas resulted in movement restrictions that had a devastating impact on the economy. At the time of writing, there have been 1,026,522 reported cases in Vietnam and 23,082 fatalities.

Meanwhile, the country’s inflation can remain under 4% this year, in line with a prior target established by the National Assembly, according to the central bank governor.

"However, the country is facing upward pressure on inflation in 2022 on external factors as Vietnam is an open economy," Nguyen Thi Hong told lawmakers at a meeting in the capital.