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Is inflation heating up again?
Increases in the consumer price index (CPI) over the past three months have raised fears that inflation may reheat in the second half of the year.
Although consumer prices have risen only 2.68 per cent since December, according to the General Statistics Office, the inflation rate was a more alarming 10.27 per cent during the first six months of the year, if compared to the same period a year ago.
Meanwhile, the Government has set a goal to maintain inflation for the entire year at under 10 per cent, and has targeted a rate of only 7 per cent.
While the World Bank forecast that the nation would see an inflation rate of about 8 per cent this year, estimates by the State Bank of Viet Nam put the figure in the range of 6-9 per cent. The Ministry of Planing and Investment, meanwhile, had predicted inflation of 7-8 per cent on the year.
But indications of upward price pressures continue to mount, as the costs of fuel, construction steel, animal feed, fertiliser and other inputs into the costs of retail goods are expected to surge in the coming months. Crude oil prices, for example, have been forecast to reach US$85-90 per barrel by the end of the year.
Government stimulus policies, including subsidised-interest loans that caused credit to grow by 17 per cent in the first half of the year and which have poured roughly $9 billion into the economy so far, also pose a risk of fanning inflation.
The International Monetary Fund and the World Bank have both warned in recent reports that sharp credit growth, along with higher raw materials prices, may spark inflation.
Dinh Van Thanh, director of the Trade Institute under the Ministry of Industry and Trade, said inflation could reignite in many countries worldwide which have implemented economic stimulus measures. "Inflation rates in many countries have already been higher than originally forecast," he said.
Trade officials also warned that imports were expected to surge in the second half, while the recovery of exports would be slower. A higher trade deficit might also be a factor in driving up inflation.
Cao Si Kiem, member of the National Consultative Council on Financial and Monetary Policies, also said that the expected economic growth rate this year of 5 per cent, combined with a State budget deficit equal to about 8 per cent of GDP, raised the alarm for inflation.
However, he noted, GDP grew by 3.9 per cent in the first half, over six-month inflation of 2.68 per cent, stressing these figures tended to ally the concerns.
But Prime Minister Nguyen Tan Dung isn’t taking any chances, and has ordered the State Bank of Viet Nam to scrutinise its monetary policies to prevent a resumption of inflation during 2009-10.
Following Dung’s instruction, central bank governor Nguyen Van Giau on Tuesday required banking authorities and commercial banks to strictly control and supervise credit growth and avoid lowering lending requirements.
He has also reminded credit institutions to take measures to cap credit growth at no more than 30 per cent on the year, as approved by the Government.
Economists were also urging the Government to keep a close eye on unreasonable price hikes of necessities during the latter part of the year and strictly penalise such violations.
Thu Ha
vietnamnews
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