Ayumi Konishi, the Asian Development Bank’s country director recently said in an interview with Agence France Presse that the government of Vietnam should accept short-term slowdown in economic growth in order to bring inflation down.
If the government wants to tackle inflation effectively, it needs to ensure coordination of its fiscal, monetary and pricing policies, analysts said.
“It doesn't make sense if on one hand the state bank shows its determination to tighten monetary policy and if at the same time the government increases oil prices,” Konishi noted.
“This coordination is a big challenge and so far, regrettably I have to say they haven't done too great,” he said.
“There’s a camp in the government that believes competitivity is at risk. So they allow the dong to appreciate step by step,” the ADB official told AFP. Though the United States is the most important market for Vietnamese exports, accounting for more than 20 per cent of the total, the fact is that the dong is still depreciating against many other currencies.
Analysts of the International Monetary Fund (IMF) also have cautioned the Southeast Asian country about the dangers of high inflation and a widening trade deficit, estimated at 12.4 billion dollars in 2007.
Vietnam is now also more vulnerable to global economic shocks since it joined the World Trade Organization one year ago, they said.
Meanwhile, Le Dang Doanh, a leading economist, proposed that the government of Vietnam should axe between 15 per cent and 30 per cent of the current construction projects nationwide in an effort to tame galloping inflation.
Cao Sy Kiem, a member of the Advising Central Monetary Policy Council told the local Ho Chi Minh City Law newspaper that the government of Vietnam will have no choice but to lower the economic growth targets to 8 per cent from its 8.5 per cent target to curb jumping inflation to 12 per cent this year.
The government of Vietnam has recently demanded no hikes of petroleum and cement prices until June of this year in a bid to stabilize the macro-economy.
Between January and February, the government had to compensate losses of VND2.5 trillion for petrol trading businesses, requesting them to manage supply and demand by increasing the reserves under any circumstances. (Labor, VNS)
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