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CPI fluctuations challenge economy
The swing of the consumer price index (CPI) in 2008 with inflation raging in the first nine months and deflation signaling in the last three months is imposing huge challenges to Vietnam in 2009.
The General Statistics Office (GSO) reported that after surging continuously in nine months, recording a high rise of 3.9 percent in May, the CPI suddenly dropped to 0.19 percent in October, 0.76 percent in November and 0.68 percent in December.
For the whole year, the CPI almost doubled the 2007 figure, a record increase over a decade, said the GSO.
The fluctuations in CPI were attributed to the Government’s tightened monetary policy, the global economic recession and fluctuations in the world market.
Tran Thi Hang, director of the GSO Trade Service and Price Department, described the CPI downturn in the year-end months as an “abnormal trend” as it was the time the purchasing power, as usual, should have been growing to herald the upcoming traditional New Year festival.
Affirming that the CPI’s continuous declines cannot be considered as “deflation,” Hang, however, emphasised that the Government “needs to take actions” to prevent the trend from plunging further.
Economists also voiced warnings of the CPI’s reverse growth and considered this a “big problem” in 2009.
Acting director of the Vietnam Economics Institute Tran Dinh Thien said it would be very dangerous for relevant agencies to focus on fighting inflation and forgetting about the deflation threat.
He pointed to the reality that the national economy and businesses have become almost exhausted after a time-consuming and costly struggle against inflation.
To deal with the situation, Vu Dinh Anh, deputy director of the Finance Ministry’s Market and Pricing Research Institute, suggested that the existing monetary and credit policies be further applied flexibly in parallel with the investment and consumption stimulation policies.
In doing so, tax reduction for businesses should be considered an important solution to spur domestic investment, Anh said.
Recognising the threat, the Government has recently launched a 100 trillion VND stimulus package, Cabinet members have also resolved to further implement five groups of urgent measures to curb an economic decline.
vna
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