Vietnam’s inflation has reached its peak and will fall gradually from now till the end of this year, David G. Fernandez, chief economist of JP Morgan Chase, said in an interview with the Thoi Bao Kinh Te Viet Nam newspaper reporters.
Inflation and trade deficit are concerning foreign investors, but the government of Vietnam can tackle these difficulties soon, he said. Vietnam is nearing to the pinnacle of difficulty now.
JP Morgan Chase has analyzed a lot of reasons and concluded that trade deficit and inflation will be much lower by late 2008.
Fernandez pointed out that the main cause for high inflation is resulted from the increase in rice prices.
However, there are some signals indicating that prices of foods will fall in coming time due to the falling prices of forward contracts in the global markets, he said, adding that it will ease pressure on inflation in Vietnam.
In addition, the Government of Vietnam had been cutting public spending to lower inflation.
Vietnam had current account deficit of nearly US$10 billion in the first five months of 2008, but the figure will only increase by US$4 billion in the second half this year, the economist said.
The country’s export growth is very impressive in the first five months, and the problem is import. One of the biggest import items is steel, but its import will be reduced if the government cuts public investments.
Fernandez said that Vietnam should now stabilize value of domestic currency by providing a sufficient amount of foreign currency.
Vietnam is known to have surplus of overall balance of payments through 2003 to 2007, he said.
The country’s total foreign currency reserves surpassed US$20 billion, mainly contributed by FDI. Once Vietnam overcomes difficulties, FDI will continue to flow into Vietnam and increase its foreign currency reserves. (Vietnam Economic Times)
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