The Prime Minister has recently shown the government’s resolve to keep
2013’s inflation at 6 per cent – a task that will entail overcoming a variety
of challenges, according to Minister of Planning and Investment Bui Quang Vinh.
During an online dialogue with
citizens on December 30, Vinh noted that high inflation is the major concern
for not only policymakers and businesses, but also ordinary people. It is the
root cause behind the need for a tight financial and monetary policy, ramifying
undesired effects for all economic sectors.
There is no denying that high
inflation leads to the depreciation of the domestic currency against the US
dollar, high bank interest rates, and losses in business operations.
The government introduced a
number of bold measures to keep 2012’s inflation in check. As a result, 2012’s
consumer price index (CPI) slowed to just 6.81 percent, a marked improvement on
the galloping 18.1 per cent in 2011 and 11.85 per cent in 2010.
The government has targeted bringing
2013’s inflation down to just 6 per cent, which was described as no easy task
to fulfil.
Major service and commodity
prices will certainly rise in line market trends, Minister Vinh explained,
citing increases in the prices of medical, education and transport services, as
well as in the cost of coal and electricity, to mobilise capital for
reinvestment.
The nature of the market economy
means such increases are inevitable. The crux of the matter is that the
government plays an important role in managing this mechanism, weighing up the
pros and cons of market fluctuations and their broader effects.
“We have tools in hand for
calculating the national economic impact of every potential price adjustment.
If the government acts carefully and closely coordinates with and between
ministries, the 6 per cent CPI target will be within reach, and price increases
will remain manageable,” concluded Vinh.
Difficulties ahead
Vinh acknowledged 2012 was
another difficult year for Vietnam due to the domestic and global economic
slowdowns. The government’s foremost priorities to stabilise the macroeconomy
and rein in inflation meant the national economy slowed to a 5.03 per cent
growth rate, much lower than the National Assembly’s set target.
The government’s measures also
resulted in a serious employment shortage. The primary goal of the Party and
State – at least while the economy continues to grow - is generating more jobs
for its people. But a tight financial and monetary policy made it difficult for
businesses to access bank loans, resulting in decreased social demand. A large
number of businesses were forced to cut production and lay off workers.
This is unwanted consequence,
confided Vinh.
The minister said that the
government is determined to create a stable macroeconomic environment over the
medium and long term, no matter the odds.
Vietnam can only attract
investment that will fuel steady growth and production and generate jobs when
the national macroeconomy is stabilised, said Vinh.
The global economy is expected not
to get out of the woods yet in the foreseeable future, inflicting a further
toll on Vietnam. Vietnam will therefore continue with the measures adopted to
contain inflation and stabilise the macroeconomy.
Without achieving sound economic
growth, we are unlikely to meet the goals of ensuring social security and
improving people’s incomes, said Vinh.
In its year-end session for 2012,
the National Assembly approved a resolution specifying major socio-economic
targets for 2013, including a 5.5 per cent economic growth rate.
Positive signs detected in the
domestic and global economies make the growth rate target achievable, said
Vinh, warning that a higher growth rate would spark high inflation.
The state budget for capital
construction will be cut to VND175 trillion, VND5 trillion less than in 2011.
Other state capital allocations will also be lower than in 2011.
To make up losses, the government
will mobilise capital from new sources. Its tools for doing so include applying
an open credit policy to help businesses access bank loans, encouraging private
investment, and attracting additional foreign investment through official
development assistance and foreign direct investment capital.
VOV
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