Vi?t Nam’s economy, which started overheating months ago, has begun to stabilize, but experts warn the government must stay the course as the global financial system is plunged into crisis.

The country, a WTO member since last year, has battled galloping inflation and a ballooning trade deficit but also has managed to slow the macroeconomic imbalances and ease fears of a meltdown.

Inflation reached 27.9 percent year-on-year last month, but the monthly increase in consumer prices had dropped to just 0.18 percent, the General Statistics Office said.

The trade deficit over the first nine months grew to $15.8 billion, but the widening of the trade gap also had leveled off.

'"Compared to two or three months ago, economic conditions have definitely improved,"' IMF country representative Benedict Bingham said. '"The government is to be commended for stabilizing the situation and breaking the negative sentiment."'

Bingham also praised the central bank for restoring trust in the dong currency and fighting inflation and credit growth through tightening liquidity with higher interest rates and other measures.

Sin Foong Wong, country chief of the International Finance Corp, an arm of the World Bank, also praised Vi?t Nam’s recent efforts.

'"Things have become better compared to the situation in the middle of the year when people were talking about a crisis, about a Vi?t Nam that could become the next Thailand,"' he said, referring to the start of the 1997 Asian Financial Crisis.

'"Now inflation has trended down, Vi?t Nam had its lowest month-to-month increase in September, and most important, food prices have also come down, especially rice,"' he said.

Other observers said Vi?t Nam’s leaders had not gone far enough, especially in cutting fiscal deficit and reducing the role of inefficient state-owned enterprises (SOEs) that dominate major economic sectors.

'"We need real cutting in expenditures,"' said Nguy?n Quang A, president of the Institute of Development Studies. '"We are awaiting some very concrete measures from the government and the SOEs."'

Experts cautioned against a slackening of economic discipline, especially when inflation remains so high and while the financial crisis is sweeping through the United States and Europe, Vi?t Nam’s main export markets.

Vi?t Nam’s young and insulated financial sector is not directly exposed to the factors that drove the U.S. banking meltdown, such as the subprime crisis, but the economy is sure to feel the wider effects of the turmoil, experts said.

'"The [Vi?t Nam] trend seems to be positive but one issue is: what will be the local impact of the global turmoil?"' Wong said.