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MPI confident inflation in 2009 will be only seven or eight percent
Though economists have warned that Vietnam will be challenged to hold inflation below 10 percent this year, Deputy Minister of Planning and Investment Cao Viet Sinh is confident that commodity prices will not rise more than 7-8 percent. Here, he is interviewed by the journal VnEconomy.
VnE: What’s the evidence for the Government’s conclusion that Vietnam’s economy has suffered a slowdown but it will not fall into crisis and recession?
Deputy Minister Cao Viet Sinh: Our GDP growth rates in the first and second quarters of 2009 (3.1 and 4.5 percent, respectively) show that Vietnam’s economy has been step by step escaping from the bottom of the downturn. We have also seen considerable growth rates in the raw materials extraction, construction industries and service sectors. Consumption is up by 8.8 percent.
The value of output in the construction sector increased by 8.74 percent, while the total retail turnover of the country increased by 20 percent in the first half of 2009 over the same period of 2008.
The 3.9 percent GDP increase in the first half of the year should be seen as a satisifactory result in the context of the world’s existing economic difficulties.
VnE: As such, has Vietnam’s economy has entered a new, optimistic period? Will the targets approved by the National Assembly (GDP growth rate of five percent, CPI increase of less than ten percent, export growth of three percent) be met?
Mr. Sinh: The situation is not that optimistic. We’ll face great challenges in the last six months of the year.
The National Assembly has stipulated a five percent GDP growth rate for 2009. To achieve that goal, we have to grow at more than a six percent annual rate in the second half, because the growth rate was only 3.9 percent in the first six months. Also, we have to do what’s necessary to prevent the high inflation from returning.
Difficulties persist in many sectors. For example, our exports fell by ten percent in the first half and we have to struggle to obtain a three percent growth rate for the whole year.
Vietnam’s total export turnover is equal to 160 percent of GDP. Some 60 percent go to big markets like the US, EU and Japan. Therefore, Vietnam’s exports are problematic until the big economies recover.
VnE: Consumer prices increased by 10.27 percent in the first half. How can we hold the CPI increase below 10 percent as required by the National Assembly directive?
Mr. Sinh: The figure of 10.27 percent you mention is the CPI increase compared to the first six months of 2008. Meanwhile, the the National Assembly said that at the end of 2009 the CPI must not be more than ten percent above the end-December 2008 level. Consumer prices at the end of June were only 2.68 percent above end-December 2008. Therefore, holding CPI below ten percent in 2009 is feasible. The Ministry of Industry and Trade believes that the CPI in 2009 will increase by only 7-8 percent.
VnE: What do we have to do from now to the end of the year to curb price increases?
Mr. Sinh: In a market economy, we need to apply market rules, not administrative measures.
However, the legal framework on price management in Vietnam is different from that in other countries. In Japan, for example, price increases are always announced three months in advance to help people avoid the risks of the price increases. In many countries, suppliers always think carefully before raising or lowering prices. Sometimes they strive to keep the prices stable in order to retain customers.
Meanwhile, our Vietnamese enterprises have been operating separately and in small scale. Therefore, they raise or lower prices suddenly whenever they want. To strengthen our market system, we need to learn from what other countries are doing.
VietNamNet, TBKTVN
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