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MOF official says current CPI performance is on right track
A senior Finance Ministry official says there will not be an end-year inflationary spike and the total price run-up for the year will be under seven percent.
The on-line newspaper VNExpress talked with Vu Dinh Anh, the deputy director of the Market and Price Research Institute, a unit of the Finance Ministry.
VNExpress: What do the slower consumer price index (CPI) increases in the last three months tell us?
Vu Dinh Anh: What we’ve seen since the beginning of the year shows that the CPI performance seen in previous years is repeating itself. In 2007, after a bout of inflation in the first months of the year, price increases slowed down in June, July and August slowed down due for many reasons.
This year is really a ‘special case,’ however. The CPI is following a normal track even when the national economy is facing so many difficulties. This shows that the Government’s demand stimulus packages and tax reductions have had a positive effect.
Projecting CPI along this ‘normal track,’ we can expect it to slow further in September in comparison with August, that is, to increase by less than a quarter of a percent. The rate of increase may pick up again in the last three months of the year, in anticipation of the Western and Lunar New Years, but the total increase will not be higher than 1 percent.
I think that the current CPI performance is good; in fact, we can sigh with relief. Up to August, the CPI had increased by only 3.47 percent. This means that even if the prices increase sharply in the last four months of the year, the inflation rate will not be higher than 7 percent.
VNExpress: Many experts have worried that the demand stimulus packages and the loosened fiscal and monetary policies will push up the inflation rate.
Vu Dinh Anh: Vietnam will have a positive GDP growth rate this year; five percent growth rate is our target.
In principle, a loosened fiscal policy, i.e increasing the state budget’s spending, will push the inflation rate higher up. However, though there has been 15,000 billion dong of ‘stimulus spending,’ there have not been any signs of a return of high inflation. Nor have there been worrying signs that eased tax policies (which put 2800 billion dong in consumers’ pockets) have pushed up prices. Our policy is a reasonable one which does not push the inflation up, but encourages production and consumption.
Credit growth rate has reached 20 percent so far this year, which is really a ‘beautiful’ figure. I think that if we hold 2009 credit growth to 30 percent, the side effects of the loosened monetary and fiscal policies on the CPI performance will not be big.
VNExpress: Some experts worry that the continued petrol price increases will have an inflationary impact.
Vu Dinh Anh: It is true that every time gasoline prices rise, the prices of other goods go up accordingly. A petrol price increase is unavoidable when the petrol price in the world is increasing, while the CPI increase in Vietnam is decreasing.
The petrol price has increased seven times since the beginning of the year by 4.27 percent, which is worth consideration.
The impacts of the petrol price adjustment and the announced electricity price increases will not be seen immediately, but in 2010.
VNExpress: What’s your answer to analysts who say that we have only stimulated supply while we have not stimulated demand yet?
Vu Dinh Anh: It is true that our tax reduction and exemption policies have just aimed to encourage enterprises to put out more goods to meet consumers’ demand. In fact, the supply of some kinds of goods is still short and the prices are still high.
Car sales are an example. In foreign countries, governments encourage people to exchange old cars for new cars and to purchase new cars. Meanwhile, in Vietnam, people are queuing to purchase cars and automobile manufacturers’ output is not high enough to meet the demand. This shows that Vietnam’s economy model is not similar to any other model in the world, and the economy needs the medicine that is suitable for it.
VietNamNet, VNE
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