Vietnam’s credit squeeze could lead to an investment slowdown in 2012 but foreign capital inflows will continue to be strong, HSBC has said in a report.

“Foreign investors are still interested in tapping into Vietnam’s burgeoning market,” the bank said, noting that foreign direct investment (FDI) inflows have been a “reliable source of investment” for the country.

According to the lastest Asian Quarterly report, Vietnam’s trade deficit is not a major source of concern as steady FDI inflows have been able to offset it.

Vietnam targets US$15-16 billion worth FDI in 2012, the government said in a statement late December. According to the Foreign Investment Agency, the amount of FDI actually brought in last year was $11 billion, or equal to the 2010 figure.

HSBC also said Vietnam’s exports have been strong, primarily due to high demand for agriculture products, garments, and crude oil as well as a surge in commodity prices.

“We expect exports to expand by 24 percent year-on-year in 2012, versus 33.3 percent in 2011,” the bank said.

Though it warned that the nation’s import-dependent exports would cause it to have trade deficits in the coming years, it noted that higher growth of exports relative to imports caused the trade shortfall to narrow last year.

“What is worrying is Vietnam’s struggle with maintaining price stability this year,” the bank said. “While potential electricity hikes and regional food supply shocks will likely stoke inflationary pressures, we expect inflation to reach single digit by the end of 2012 due to a high base effect.”

It added that the central bank is likely to lower the policy rate in the first quarter.

Vietnam’s inflation slowed for a fifth month in January, with consumer prices climbing 17.27 percent from a year earlier, the General Statistics Office said last week.

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