Late last week, economists warned that the targeted inflation rate of 6.5% set by the National Assembly would be exceeded. Several leading analysts are now arguing that Vietnam should focus on long-term economic plans that aim at a sustainable economy, rather than on curbing the inflation at any cost. What the country needs, said Tran Dinh Thien, head of the macro economic board of the Vietnam Economic Institute, is to loosen the cap.
“Bringing the inflation index into consideration must be seen as the key for inflation control,” Thien said.
Thien called for raising the cap to 10% from the current 6.5% approved by the National Assembly in its a move to stabilise the economy in a changing world market. At 6.5%, he argued, the government will be forced to take every measure possible to rein in prices, including intervening in the free market.
“Over-restraint of prices at the moment may lead to a price boom that cannot be controlled in the future,” he added, surmising that an increase in the cap would bring about positive results, such as production cost cuts and increased efficiency in manufacturing.
Nguyen Thi Hien, member of a prime ministerial research team on economics, shared the same view saying that there’s too wide of a gap between prices in Vietnam and in the rest of the world.
“I’m disappointed that the petrol price in Vietnam continues to be kept at low levels by government subsidies, and as a result, the government still has to deploy forces at border gates to stop petrol smuggling out of the country,” she said.
“Some argue that the government should curb the price hike in order to protect the national state-enterprise-based economy,” she added, countering that Vietnam needs to focus on creating a competitive economy rather than protecting a certain group in the economy.
Hien agreed with findings that the 6.5% level was unrealistic, and believes it could be safely raised to 8% or even higher.
As the world has gotten used to inflation with the latest economic data, Vietnam should break out of a price scheme kept artificially low by government intervention, the analysts concluded. Statistics released last week by the Ministry of Finance indicated that in the January-August period, the CPI increased as much as 6%.
The General Statistical Office has not released the full year-on-year CPI rate.