Vietnam finds ways to control inflation rate at 18pct

01-Nov-2011 Intellasia | Vietbiz24 | 7:01 AM Print This Post

Vietnam seeks to find the root causes of high inflation rate to take timely and efficient measures to control it.

In October, Vietnam’s CPI (consumer price index) increased only 0.36 percent from September (this is the lowest rise in last 14 months), but still rose 17.5 percent against December 2010. The lending rate at banks has slipped to 17-19 percent per year, but only a handful of companies could borrow at 17 percent per year.

Currently, the interest rates still remain high, therefore, enterprises are facing many hardships due to low consumption amidst high inventories. Meanwhile, the developments of the world economy are increasingly complex with many potentially unpredictable consequences.

Thus, in a bid to keep macroeconomic stability, suitable economic growth and ensure social security, especially to control the inflation rate at 18 percent for the whole year, authorities should have specific measures, including reduction of public spending and cutting down unnecessary projects.

However, in fact, in past time, the scattered investment situation throughout the country has led to high credit growth (over 30 percent) and high money supply. This fact has contributed to increasing the country’s import for equipments and machineries to serve investments. This is why the big trade deficit is said to affect inflation.

Besides, another important reason contributing to high inflation is psychological inflation. Economists said that, if interest rates rise 1 percent, inflation will increase only 0.03 percent, but psychological inflation will increase 1 percent, which will cause real inflation at 0.64 percent.

With this fact, a group of solutions given by the government is to tighten and strictly control the forex rate problem and fight dollarisation in the economy. Additionally, the government has also directed authorities to restructure investments, including both public investments and common investments of the whole economy, concentrate capital for urgent projects and boost production activities. If this group of solutions is conducted simultaneously, the economic growth for the whole year will likely reach 6 percent, while the inflation rate will likely be kept at 18 percent.

 


Category: Economy

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