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Inflation in Vietnam may exceed target, warn officials

Jul 08. 2016
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ECONOMIC experts fear that Vietnam might not meet the target of keeping inflation under 5 per cent in the second half of this year if money supply is not strictly controlled.

State price-management agencies will face many challenges in the second half if they are to meet the National Assembly’s target of keeping inflation under 5 per cent, experts said at a conference.

Reports from the General Statistics Office show that the Consumer Price Index (CPI) rose by 0.46 per cent last month, the highest June increase recorded in the past five years.

Compared with December 2015, the index has increased by 2.35 per cent.

Addressing the conference on price movements, representatives of the Finance Ministry’s Pricing Management Department expressed concern that inflation in the current half of 2016 would be under pressure by the state-budget balance, continuous price rises in healthcare and education services in accordance with market mechanisms, and the central bank’s policies on regulating foreign exchange and interest rates.

Nguyen Loc An, deputy director of the Ministry of Industry and Trade’s Domestic Market Department, said global political volatility and decreasing demand in importing countries would negatively affect prices of many products, including oil. In the domestic market, unexpected price rises in some cities and provinces are also expected as the country is nearing a season of storms and floods.

However, An expects prices will not go up strongly, as the government has instructed relevant agencies to prepare sufficient supplies.

The government will also maintain reasonable price increases in public services, An said, forecasting that the CPI this month will rise at the same rate as in June.

Economist Nguyen Tri Long suggested that authorities be cautious in regulating inflation in the coming months given unexpected factors that may cause inflation to rise in the second half.

Besides higher prices for public services and adverse weather, Long said, a rising money supply, foreign-exchange pressures and costlier imported products might be other reasons for higher inflation.

Long said the inflation-control target might not be met if the money supply is not strictly controlled. State price-management agencies must therefore pay due attention to inflation.

Long suggested that in the future, money policies be coordinated closely with macroeconomic stability.

He also said some regulations must be adjusted to tighten lending rules in order to avoid risks for real estate and financial markets.

SBV head urges caution

The governor of the State Bank of Vietnam (SBV), Le Minh Hung, last week urged caution in price controls, warning of great pressure to raise lending rates in the future.

Speaking at a government teleconference, Hung said that aside from existing price-control measures, prudent management of other macroeconomic activities was also needed to avoid affecting interest rates.

While most of the capital for the economy comes from bank credit, the demand for raising capital through government bonds has also increased. Hence proactive and flexible management is necessary to keep lending interest rates stable, he said

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