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Inflation resists monetary tightening, so far
The tightened monetary measures initiated by the government is yet to show results as far as the primary target – reining in inflation – is concerned.
The Consumer Price Index (CPI) for March was up 2.17 per cent over February and 13.89 over March 2009, the highest growth in a year.
The increase was mainly attributed to the 15 per cent electricity price hike that took effect at the beginning of the month and the two fuel price hikes that saw petrol and diesel oil go up 28 per cent and 35 per cent respectively by the month end.
Rising global commodity prices as well as high lending rates – 16 to 18 per cent for manufacturing firms and 18 to 22 per cent for non-production enterprises – have contributed a lot to pushing up local prices.
According to experts from Viet Nam Asset Management Ltd (VAM), which primarily engages in public and private equity investment and advisory services, these impacts on inflation will continue for a couple more months at a minimum. This outlook, and the fact that year-to-date CPI growth has already reached 6 per cent makes the Government's target of keeping inflation down to seven per cent in 2011 look highly unrealistic.
On March 8, the State Bank of Viet Nam (SBV) raised the refinancing and discount rates to 12 per cent per annum from 11 per cent. With inflation not showing any signs of easing thereafter, on 31 March, for the third time this year, the central bank raised the refinancing rate to 13 per cent per annum while keeping the discount rate unchanged at 12 per cent, effective from 1 April.
The latest move of the SBV has put paid to rumours and, perhaps more precisely, expectations in the market that interest rates would be lowered soon to support production.
Despite the monetary tightening, total credit growth in the first three months was recorded at 5 per cent. As regards fiscal policy, the government maintained a firm stance on reducing public spending. If the inflation rate does not subside, further tightening measures can be expected from the government, such as raising reserves ratios for banks, of which rumours are already swirling.
Thien Ly
Vietnamnews
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