HANOI -- Vietnam’s annual inflation rate edged up to 4.44% in May, official data showed on Wednesday, nearing the government’s target ceiling of 4.5% for the year and a potential challenge to efforts to boost credit growth to drive activity.

The Southeast Asian country, a regional industrial hub, also reported strong growth in exports and industrial output in the month, but rising inflation could be a concern for authorities.

Consumer prices had risen 4.4% in April from a year earlier, and rose 3.25% in 2023.

Vietnam is targeting economic growth of 6.0%-6.5% this year, faster than an expansion of 5.05% last year.

The central bank, the State Bank of Vietnam, is aiming for credit growth of 15% to help meet the growth goal, but banks have struggled to increase their lending this year.

Banks’ total outstanding loans as of May 10 had risen 1.95% from the end of last year, state media cited the central bank as saying on Tuesday.

Oxford Economics said on Wednesday it expected exports to continue to grow solidly, but the boost to GDP would likely be limited.

“Interest rates in Vietnam’s largest importer, the U.S., are likely to stay higher for longer and the overall global external outlook is soft,” Oxford Economics said.

“We expect 2024 GDP growth to miss the 6.0-6.5% target,” it added.

Other data released by the General Statistics Office (GSO) on Wednesday showed exports are estimated to have risen 15.8% in May from a year earlier to $32.81 billion, led by shipments of electronics and smartphones

Imports in the month are estimated to have grown an annual 29.9% to $33.81 billion, resulting in a trade deficit of $1 billion for May, the GSO said.

Shipments of smartphones in May are estimated to have risen 50.6% from a year earlier to $4.4 billion, while electronics exports rose 31.5% to $5.9 billion.

Industrial output in the month rose an annual 8.9% and retail sales were up 9.5%, the GSO said.

Oxford Economics said it expected the central bank to keep its discount rate unchanged at 3% for the rest of the year, but added that “the key risk to the policy rate lies with the Vietnamese dong, which has depreciated against the U.S. dollar by an estimated 4.4% year-to-date”.