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Be watchful over inflation: experts
Experts have warned against over-optimism about the decreasing inflation. If the situation cannot be controlled well, high inflation could still break out in the last months of the year.
In August 2008, transport fees increased sharply as a result of the petrol price increase announced in late July. However, as food and foodstuff prices decreased, the CPI increase in August over July was restrained at 1.56%. Prior to that, the General Statistics Office announced the modest CPI increase of 1.13% over June. The satisfactory results have driven people to the optimistic belief that the inflation rates will further decrease in the last months of the year.
However, experts have warned that if the situation cannot be controlled strictly, high inflation will return in the upcoming months.
According to the taskforce on domestic market regulation, the CPI in the first eight months of the year increased by 21.65% over December 2007, while it increased by 22.14% over that of the first eight months of 2007.
Experts still can see the presence of factors that could lead to high inflation in the upcoming months. The demand for consumer products will increase this month, as there are the September 2 holiday, mid-autumn festival and the opening of the new school year.
The experts say that it is now the high stormy season, therefore, food and foodstuff prices may increase in September. While the prices of some essential products like cement, steel, fertiliser and paper are forecast to decrease, medicine prices are tending to increase.
The Ministry of Industry and Trade has asked ministries and branches to pursue measures aiming to restrain price increases and balance the supply and demand of essential products.
The continued inflation decreases in the past two consecutive months have raised the question of whether Vietnam should loosen its monetary policies. However, Ngo Tri Long, an economist, said that Vietnam should not loosen or further tighten the monetary policies: It should maintain the current level of control over the monetary policies.
The head of the capital source division of a joint-stock bank told the press that it is not the right time to think of loosening monetary policies or slashing the basic interest rate now as the signs of decreasing inflation are not really solid.
If the basic interest rate was cut now, businesses would rush to borrow money to make investments and expand investment projects. This would make inflation decreases impossible.
According to Tran Du Lich, Head of the HCM City Economics Institute, what Vietnam should do now is not loosen the monetary policies, but tighten them in a flexible way. This means that banks should still provide credit for feasible and effective investment projects.
Lich said that Vietnam will only be able to sigh for relief when the CPI increase is lower than 1%, adding that the decrease of CPI increase in August was not big enough.
Different scenarios of CPI increase have been predicted for September and upcoming months. In the low scenario, the CPI increase would be 0.8% in September, 0.8% in October, 1% in November and 1.6% in December. In the high scenario, the CPI increases would be 1.05% for September, 1.05% for October, 1.3% for November and 1.8% for December.
With the low scenario, the CPI of the whole year 2008 would be 24.12%, while the figure would be 24.38% in the high scenario.
According to Standard Chartered Bank, the inflation rate of Vietnam will be 25.5% in 2008 and 15% in 2009.
VNN
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