|
Loosening monetary policies cast shadow of inflation
Economists are concerned about a return of inflation in the wake of the government’s loosening monetary policies to counter the economic downturn.
One telling factor is the 0.44 percent increase in the CPI this month, says Dr. Le Dang Doanh, a senior research fellow at the Institute of Development Studies in Hanoi and a former senior economist at the Ministry of Planning and Investment.
Doanh points out that many consumer prices have risen by 7-15 percent on the back of higher power, water and gasoline prices.
Another factor is the government-ordained rise of more than 20 percent in the minimum wage starting in May.
The monthly wage increase from VND540,000 (US$30.38) to VND650,000 ($36.57) applies at all government agencies, state-owned companies, and other commercial and non-commercial organizations formed and operating under Vietnam’s laws.
Doanh says that too could fuel inflation, which rose last year to the highest rate since at least 1992.
“Looser monetary policies to stimulate the economy have accelerated the growth of payment means.
“Total outstanding loans in April were up by 11.16 percent from the end of last year while payment means rose an estimated 11.4 percent in the period, whereas first-quarter GDP (gross domestic product) increased a mere 3.1 percent.”
Noting a bellwether of sentiment, Doanh estimates that the volume of cash in circulation outside the banking system has climbed 3.43 percent in the past month.
He says import spending will rise along with the CPI, but Vietnam’s export trade will continue to struggle because of the global recession’s impact on key markets like the US, the EU and Japan.
In other words, a widening trade deficit is inevitable.
A broader trade gap combined with loosening monetary policies and the recent hikes in global material prices will cast a shadow of inflation over the economy again, he says.
“To cope with the global crisis, we need a plan to restructure the economy, greatly improve the banking system and raise the international competitiveness of Vietnamese enterprises and Vietnam’s economy generally.”
Another economist, Tran Huu Dung, is worried about the unemployment rate above all, though the looming specter of inflation scares him too.
“Vietnam’s economic slowdown has come in the wake of the global recession. The government is trying to stimulate the economy by pumping money into the domestic market,” Dung says.
“But in my opinion, it won’t be enough. With a limited budget, we can’t afford to inject the huge amount of money it would take. And inflation will return if we opt for printing more cash.”
He thinks the government should concentrate its economic stimulus packages on health care and education above all.
Dung’s colleague Vu Hoang Linh has a similar view and recommends that the government shift its spending emphasis to rural infrastructure, technology, education and health care.
“These sectors will create the human and technological resources for future growth,” says Linh.
He says the government should also support workers with below average incomes as they have taken the hardest blows from the global economic contraction.
thanhnien, tbktsg
|
