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Be cautious, high inflation may return: expert
Dr. Tran Du Lich, Member of the National Assembly’s Economics Committee, stressed that the factors for high inflation still exist when talking with the press about the problems of Vietnam’s economy.
Do you think that the measures to stimulate the demand, including the US $1 billion package, will bring effectiveness?
I think that the Government in going on the right track. The Prime Minister, Nguyen Tan Dung, has announced to use US $1 billion to subsidize interest rates for enterprises. This will bring a lot of good things. Banks will be able to lend capital, while businesses will have capital to run their production.
Besides, the demand stimulus package, when used to subsidize interest rates, will also help prevent from the interest rate decrease movement on the market. You may well know that if the market interest rates keep going down, it would be very difficult to mobilize capital from the public.
I think that it would be a good solution if we subsidize interest rates for the enterprises, which have investment and production plans in the business fields the Government is encouraging and the fields which have high impacts on the socio-economy. This will help select the right addresses to inject money in.
HCM City in the past also ran the demand stimulus program in the last decade which brought good results with many infrastructure items built up and people’s lives improved considerably.
Do you think that Vietnam’s economy has fallen into recession or crisis? What is your forecast about the national economy in 2009?
I can say for sure that Vietnam’s economy has not fallen into crisis. Meanwhile, it is very difficult to give predictions at this moment. You see, even large economic institutions also give different predictions and different figures.
I just want to say that we need to keep cautious with the possibility of the high inflation to return by the end of 2009. I say about the risk of inflation to return because currently, many countries in the world are trying to stimulate the demand, which means that high volumes of capital will be poured into investment and consumption, which may cause high inflation.
The crude oil price decreases and lower taxes will lead to the decreases in state budget collection. What will we have to do then?
It is true that these factors will cause the big decreases to the state budget collection. I think that the Government will surely submit to the National Assembly the plan on higher borrowing in 2009. It is really a quite normal thing.
A lot of businesses affirm that capital is not the thing they want most at this moment…
You are right. I made a tour to many businesses in the north and I found out that businesses now need markets for their products. However, I think that businesses need to seek markets themselves while the state just can help.
The Government has approved HCM City authorities’ plan to issue US $1 billion worth of urban bonds. However, experts have warned that the issuance will not bring high efficiency.
I don’t think so. If the city does not have the sum of money, how can it get money to clear land to get site for investors? People say we should allow foreign investors to come to build infrastructure items. However, they will only come if they can get ‘clean’ land. The city wants to give ‘clean’ land to investors, and it needs US $1 billion.
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