The State Bank of Vietnam, the central bank, should loosen the monetary policy a little bit in order to avoid an economic recession, proposed Tran Hoang Ngan, a member of the National Monetary Financial Advising Committee.
Answering an interview in Labor Newspaper, Ngan said central bank should change the management of monetary policy for this period.
“A tight monetary policy is necessary in the beginning of this year, however, the government then implemented some measures such as regular spending reduction, public investment supervision and speculation fighting. Therefore, central bank should now relax more the tight policy to stabilize the market and help develop economy,” Ngan noted.
Recently, there is signal of slowdown in production due to capital shortage. If the situation is prolonged, Vietnam will not reach the growth target, he said.
“We should not let the economy suffer high inflation and recession,” he said, adding that the country would have shortage of goods, but the stock and property markets could not be recovered.
Ngan said that an effective supply of money will not cause inflation because it helps create commodities.
The expert suggested the central bank reduce compulsory reserve ratio to 8 per cent-9 per cent from current 11 per cent, and flexibly apply rediscounting and refinancing tools to avoid shocks in inter-bank markets.
“CPI is high due to not only money supply, but also other important factors such as waste, corruption, ineffective public investment, surging prices of oil and gas, foods and foodstuffs,” he said.
Vietnam’s consumer prices soared 21 per cent in April from a year earlier. (Labor)
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