UPDATE 1-Vietnam annual inflation races to 25.2 pct in May

(Updates with analyst comments, details)

HANOI, May 27 (Reuters) - Vietnam's annual inflation accelerated to 25.2 percent in May from 21.4 percent in April, its seventh consecutive double-digit reading and one of the highest in Asia.

The government's General Statistics Office estimated on Tuesday the average inflation in the first five months of 2008 would rise to 19.1 percent compared with the same period last year from the 17.6 percent in January-April.

Monthly inflation data are not fully available but the inflation rate in May could be the highest since 1991 when Vietnam reported its annual inflation at 67.5 percent.

Prices are rising all over Asia, but especially quickly in Vietnam, presenting the Communist Party government with one of its biggest challenges and forcing it to lower ambitious economic growth targets.

"Rice prices are largely to blame but even if you leave that aside, all the contents of the basket are moving higher," said Prakriti Sofat, Asia economics analyst at HSBC in Singapore.

"The economy has been operating above potential for two or two and a half years and it has hit capacity constraints.

"It is absolutely key for growth to slow to contain at the same extent the ballooning trade deficit," she said.

Imports have soared, pushing the trade deficit to an estimated $14.4 billion in the first five months, more than three times higher than in the same period of last year, the government said on Monday [ID:nHAN267458].