Consumer price rises slow in Vietnam cities-paper

HANOI, July 22 (Reuters) - Consumer prices in Vietnam's biggest cities are rising at a slower pace this month than in June, and that could result in the country's overall inflation also dropping in July, a state-run newspaper reported on Tuesday.

The consumer price index of Ho Chi Minh City would rise 0.54 percent this month from June, compared with a 2.37 percent increase from May, the Dan Tri online newspaper (www.dantri.com.vn) cited official statistics as showing.

Food prices in the country's largest city of eight million people would drop 1.39 percent in July from a month earlier, compared with a rise of 1.77 percent in June against May, the report said.

In Hanoi, consumer prices would rise in July at a monthly rate of 1.56 percent, slowing from a pace of 2.39 percent in June, it said, without giving any annual percentage change.

"The country's CPI in July would rise close to an optimistic scenario given by ministries, with a growth of 1.5 percent," the online newspaper said.

The Communist Party government is facing its biggest economic test since market liberalisation began in earnest in the mid-1990s. It has cut growth targets and raised interest rates three times this year among other measures to fight double-digit inflation.

The consumer price index rose 2.14 percent in June compared with May, less than the 3.9 percent increase in May, but the annual inflation rate picked up to 26.8 percent from 25.2 percent in May.

Economists are bracing for annual inflation to hit 30 percent next month after the government raised fuel prices by as much as 36 percent on Monday. Some analysts expect a marginal impact on July inflation from the hefty increase in fuel prices.

On Tuesday the Asian Development Bank cut its forecast for Vietnam's growth to 6.5 percent from its previous projection of 7 percent while it revised Vietnam's annual inflation this year up to 19.4 percent, from 18.3 percent previously estimated. (Reporting by Ho Binh Minh; editing by Vidya Ranganathan)