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Second demand stimulus packaged proposed
Many members of the National Advisory Council for Monetary Policy have proposed a second demand stimulus package be implemented right after the first package finishes at the end of 2009.
The council had a meeting on August 11 to hear its members’ suggestions on measures to regulate the national economy in the post-economic downturn period.
According to Dr. Tran Hoang Ngan, a member of the council, many of the economists in the council proposed kicking-off a second demand stimulus package right after the first one finishes in late 2009. With the second stimulus package, the interest rate subsidisation level could be lower, while the list of those eligible for the package could be shortened. The economists said that the second demand stimulus package is necessary to prepare businesses for the post-downturn period.
Moreover, the economists also think that it is necessary to delay collecting taxes in order to help businesses survive and develop.
They said that the national economy and enterprises have gotten out of the emergency ward, but they are still in the hospital. Therefore, it is necessary to provide more support policies to help businesses obtain sustainable development.
Also according to Ngan, regarding monetary policies, many members of the council have suggested not changing the basic interest rate and applying a flexible policy on credit growth. If the national economy grows well, the credit growth rate should hover around 30 percent, while the State Bank of Vietnam should not fix the growth rate at 25-27 percent.
The economists also believe that there is no reason to devaluate the local currency. Commercial banks have reported recently that they have purchased more dollars, including from portfolio investors who sold dollars to get capital for investment.
At the meeting, attendees forecast the GDP growth rate of some 5 percent this year, and declared that inflation is not a concern. The inflation rate will be some 7 percent in 2009 and less than 10 percent in 2010. The state budget deficit, meanwhile, will be below 7 percent, they added.
Cao Sy Kiem, Member of the National Advisory Council for Monetary Policy, talks about the issue.
TBKTVN: Some people have expressed concerns about the return of high inflation as Vietnam has put a big sum of cash into circulation to stimulate demand. What is your viewpoint about that?
Cao Sy Kiem: It is a realistic possibility that inflation could return. A big sum of cash in circulation does cause high inflation, while the risks are even bigger if the money does not go to the right addresses, and leads to higher bad debt ratios.
Therefore, I think that it is necessary to apply reasonable measures to take back cash from circulation. It is necessary to strengthen management and practice thrift in budget spending, administration and investment costs. Taking back cash from circulation could be carried out through many channels, like increasing demand, increasing consumption or issuing Government bonds and raising deposit interest rates.
TBKTVN: Do you think that is it a worrying problem that the state budget is decreasing and we have to spend money to stimulate demand?
Cao Sy Kiem: It is true that the sum collected for the state budget has decreased significantly as production has been scaled down, exports have gone down, while the Government has had to reduce taxes and the price of crude oil has decreased.
Meanwhile, we have many things to spend money on. I think that in order to ease the worry, we need to increase collection and control the spending.
Regarding collection, we can mobilise capital from the public, such as by issuing bonds. We should not too rigid about the bond interest rates now. In order to mobilise capital from the public, we need to offer interest rates that are attractive enough.
Moreover, we can also increase collections from services. Though the tourism demand has decreased in the economic downturn, we will still be able to attract tourists if we offer high-quality services.
vietnamnet, vneconomy
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