Some local banks refused to exchange dollars, and local stock prices collapsed as banks held on to their dong and refused to lend money to buy shares. The government in March lowered Vietnam's growth target for 2008 to 7% from 8.5% to help focus the drive against inflation. Since then, a global spike in food prices and a poor rice harvest have made things worse. The central bank expects Vietnam's current-account deficit -- the difference between a country's import and export of goods and services -- to hit 7.5% of gross domestic product this year, up from 5% in 2007. The current-account deficit in Thailand was 6.5% of GDP when it was forced to devalue the baht in 1997, triggering the Asian financial crisis. The Vietnamese, meanwhile, have been draining bank accounts and buying gold instead. Some have also started hoarding dollars as a hedge against inflation.
Apartment prices in Ho Chi Minh City, the country's commercial hub, have fallen by half so far this year, local media reports say. Morgan Stanley estimates loan growth has been expanding at over 35% a year and exposure to the property market is about 10% of total loans.