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Rising CPI not a sign of inflation
Dr. Tran Hoang Ngan, from the Advisory Council for National Financial and Monetary Policies, spoke to Sai Gon Giai Phong (Liberated Sai Gon) newspaper about the national CPI and stagflation.
Do you think that the continuing rise in the CPI shows signs of a return of inflation?
Such comments are quite wrong. In the first five months of the year, the country’s total value of goods and retail sales and services was estimated at VND452.3 trillion, a year-on-year increase of 21 per cent. In other words, total retail sales achieved a growth rate of 8.4 per cent after the price factor was excluded.
The CPI increased by 0.44 per cent in May as compared with April, and up 5.58 per cent over the same period last year and 2.12 per cent as compared with the end of 2008. Importantly, these CPI indications were sensible and within safe limits in the context of the country’s current economic situation.
However, what do you think when many opinions go that the increasing CPI and a trade deficit could trigger inflation?
At the time when the Government’s application of measures to loosen monetary policies is encouraging economic growth, the slight CPI rise is good since it shows that the sale of goods is smooth and the local market’s purchasing power is recovering.
Although the country’s trade deficit was $1.5 billion in May and $1.1 billion in the last five months, many key export items also achieved high growth rates of value.
In particular, the export value of crude oil rose by $48 million, garments and textiles up by $37 million, seafood products up $10 million, and electronic components up VND5 million.
Additionally, foreign direct investment and capital from official development assistance (ODA) sources implemented in the first five months were higher than the trade deficit, registering at about $2.8 billion and $720 million, respectively.
This proves that the economy is recovering, so inflation is not an overwhelming problem. Our necessary work now is how to keep inflation at an acceptable level.
What inflation rate is OK? What measures are needed to prevent the possibility of a return of high inflation?
The yearly inflation rate should be kept at between 5 and 8 per cent since it would continue stimulating the economy. High inflation always occurs when State budget-related spending is ineffective. So to curb high inflation, the first thing we have to do is to ensure that all spending from the State budget is used in conformity with designed purposes.
Strictly supervising the implementation of the Government’s stimulus packages at ministries and localities is also necessary to prevent unplanned investments. For commercial banks, they need to control credit and minimise their non-performing loans.
Banks must pay attention to ways that can keep personal loans, no more than loans for investment for production and trading activities. Meanwhile, forex-related policies should be adjusted in a timely manner according to market fluctuations.
It is necessary to have policies and measures to help the real estate and securities markets develop in a healthy and stable manner. To stabilise prices, producers as well as distributors must ensure supplies for the market.
Ministries, branches and localities must take active measures to fight against natural calamities and epidemics as well as food safety violations since these problems often have a great impact on the quantity as well as quality of food and foodstuff which account for up to 42.8 per cent of national CPI.
VietNamNet, VietNamNews
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