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Inflation likely to hit double digits this year
Economists have warned that inflation is showing signs of surpassing 10 percent in 2010 unless suitably tight macro-economic management policies are put in place.
At a workshop on inflationary pressures in Hanoi on April 16, Nguyen Dai Lai, a financial expert, provided insight into the current economic picture. Although statistics from the first quarter of 2010 have revealed positive growth for the post-deflation period, with the GDP up 5.83 percent against 3.1 percent in the same period last year, the statistics also sent out signals of an unstable economy, including the threat of inflation.
“Though inflation has not yet broken out, the threat that it may become impossible to keep the rate at less than 10 percent is looming over the economy as the CPI growth in March was high, which has been the trend since the beginning of the year,” said the economist.
He continued by saying that the CPI index in March rose by 0.75 percent over February, indicating that, to meet the Government target to keep inflation under 7 percent for the entire year, CPI growth rates must be as low as 0.32 percent for the remaining nine months.
Dr. Vu Dinh Anh, Vice Director of the Institute of Price Research Science under the Ministry of Finance, said the steep rise of 0.75 percent in the CPI index in March was “abnormal”.
The CPI index in March is always decisive in setting the year’s economic trend and “only with a rate of less than 0.5 percent compared to the previous month could the yearly inflation rate remain in the single digits”, said the senior economist.
In addition, the Government has recently raised the prices of some essential goods such as petrol and electricity, thus pushing up the CPI index in March and increasing production costs to a level even higher than the CPI.
A hefty rise in the credit supply, at a rate even higher than that of GDP growth, and increasing trade deficits have also contributed to inflationary pressures this year, Lai said.
If initiatives and policies to cope with the threat are not taken, the economy will relapse into inflation and fall into a crisis similar to, or even worse than, 2008, Lai warned.
He asked the State to give the central bank full power to work out and govern monetary policies to prioritise price stabilisation in an effort to ensure sustainable development.
Bank interest and exchange rates should be governed based on bank regulations instead of regularly issuing administrative policies or legal documents on financial and monetary management, he added.
Economists called for a programme against “dolarisation” or “goldisation”-that is, the domination of transactions in dollars or gold, which is now out of control and has derailed the implementation of monetary policy.
They pointed out the urgent need to set up a supervisory machine, including the use of coercion, to monitor the use of foreign currencies in the payment and regulation of goods and services at home.
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