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Enhanced measures to curb inflation
The Government’s measures to control inflation have had a certain impact on the national economy. However, whether they will hold out long remains unpredictable.
It is imperative to intensify measures to curb inflation for the time being. A Voice of Vietnam Radio reporter interviewed Vu Dinh Anh, Deputy Head of the Institute for Scientific Research, Market and Price under the Ministry of Finance on the issue.
VOV: Inflation is currently going down. What is your assessment of the situation?
Mr Anh: From the beginning of this year the pressure on inflation and prices has shown a downturn as the consumer price index (CPI) in July was 1.13 and 1.56 in August. This is due to many factors including internal and external elements.
The external elements include some key commodities on the international market such as oil, petroleum, food and other materials where the prices are decreasing after surging for a long period of time.
Internally it is related to the national economy, especially measures to control inflation and tighten monetary policy which have had a certain impact.
VOV: Apart from these factors, what do you think about the Government’s measures to curb inflation and how effective have they been?
Mr Anh: After the Government came up with its inflation control measures, positive results were achieved. In addition, the State has proved more flexible in managing policies and more active in dealing with issues related to the international and domestic markets.
VOV: It is impossible for us to be subjective against what we have achieved in our efforts to control inflation. What are the specific dangers?
Mr Anh: Lessons from the past have warned us not to be subjective. Otherwise, all the results obtained will be lost in a short period of time. In particular, there will be unpredictable situations such as fluctuations on the international market. Currently, the prices of essential fuels on the international market are going down. However, it is difficult to predict what the trend will be at the end of this year. Therefore, this will have a negative impact on our ability to control inflation.
If the internal elements are loosened up, pushing up the prices of commodities, controlling inflation will be difficult to achieve. Furthermore, the prices of most commodities in the later months of the year are often higher than in the middle months. This trend can last until the traditional Lunar New Year festival (Tet). Unless Vietnam implements serious measures it will be harder to curb inflation in 2009.
VOV: Economic experts have said that stabilising the prices of essential commodities will play an important role in containing inflation from now to the end of this year. People also say that the Government should not allow price rises for key commodities such as cement, steel, electricity and coal. How do we deal with this issue?
Mr Anh: The Government is committed to keeping the prices of key commodities such as electricity, water for daily use, cement and steel stable.
I don’t think that it is necessary to apply the measure inflexibly. As the soaring inflation rates in 2007 and 2008 have been an unsettling experience, the Government should adjust its policy at a suitable time. For example, the price of petrol can change according to market prices so cement, steel, electricity and water could apply the same measures as petrol. The Government’s adjustments will be flexible in accordance with the market economy.
VOV: Is it the right time to loosen the monetary policy when businesses still face difficulties in seeking capital?
Mr Anh: Many people have said that the Government should loosen the monetary policy as the consumer price index in recent months is lower than in previous months. However, I think that it is not the right time to loosen up the monetary policy, especially when taking interest rates and credit into consideration. With the current rate, we have a real negative interest rate, instead of a real positive rate. If the interest rate increases the economy in general and businesses in particular, especially small and medium sized enterprises which depend on credit from the banks will face a number of difficulties. Therefore the interest rate should remain the same for the foreseeable future.
Furthermore, from now to the end of this year, credit is likely to increase sharply. However as credit rose sharply last year so the key task for this year is to reduce the credit rate in line with economic development. The maximum rate should be 25-30 percent. If the credit rate goes up this will pose a big risk to the economy both this year and next year.
VOV: Thank you very much.
VOV
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