The government of Vietnam has to attain its economic growth and tame inflation to ensure the macroeconomic stability as the CPI index for the January-February period has soared 14.89 per cent on year, state media said Thursday.
This year Vietnam has set the target of achieving the GDP growth rate of 8.5 per cent-9 per cent and the task to keep inflation below the growth level seems to be infeasible, the Labor newspaper said, citing government analysts.
“It is high time the government of Vietnam to carefully consider growth and inflation,” said PhD Vo Tri Thanh-head of the Central Institute for Economic Management’s International Economic Integration Department.
PhD Cao Sy Kiem-vice director of the National Monetary Advising Committee-cum-chairman of the Association of Small and Medium Businesses emphasized that because the world economy is slowing down, Vietnam’s economy will be more severely effected due to the ICOR coefficient that gauges investment-growth-effectiveness.
Compared with other countries which spend 2.5-3 investment units to generate one growth unit, Vietnam has to spend up to 6 units because limited capital absorbability, Kiem noted.
Favoring the tightened monetary policy being adopted by the State Bank of Vietnam by asking local commercial banks to raise deposit interest rates, compulsory fund reserves in order to tame jumping inflation, which is unpredictable this year, Kiem proposed measures for the government:
Tighten state budget-sourced investments to cut losses and wastes; Restrict loans for property to cool rising prices. [Currently, property prices are not included in the basket of goods to calculate the consumer prices], and allow groups and corporations to issue corporate bonds in parallel with sovereign bonds to reduce surplus greenback.
A group of Harvard University economists also recommended that Vietnam should reduce “shock” for its economy which enters a phase of potential risks due to factors locally under the shadow of the world slowdown.
The group advised the government of Vietnam to tame inflation, narrow the state and trade deficits, cool down the overheated credit growth.
Surplus foreign investment flow, which reached more than US$22 billion-US$23 billion, or 30 per cent of the Southeast Asian country’s GDP, poured into the economy last year, meanwhile, a great number of state-owned enterprises have bad performance. Between 2005 and 2007, money supply soared 135 per cent and GDP grew only 27 per cent.
Vietnam’s market economic management systems are not responding to the demand of the country’s economic integration, the Harvard economists said, adding policy makers, state agencies, including the Ministries of Finance, Planning and Investment and State Bank of Vietnam lack a common and effective coordination in adopting the macro policies due to weak capacity. (Labor Online, Youth Online, vietstock.com.vn)
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