Vietnam - Inflation rate decreases, but worries have not been eased

VietNamNet Bridge – Believing that the slowdown in the consumer price index (CPI) in June reflects the stability of the national economy, foreign institutions have warned that the minus CPI increase in June could be the negative signs for the production and consumption.

Foreign experts see both positive and negative things

JP Morgan Chase, in its latest report, commented that the inflation performance in Vietnam has become surprisingly positive. It stressed that the 6.9 percent CPI increase in the first half of 2012 in comparison with the same period of the last year is a much more satisfactory result in comparison with the predicted rate of 7.1 percent.

According to JP Morgan, with the current economic performance, Vietnam would continue to see the inflation rate going down before it bottoms out in October. By that time, the CPI is expected to increase by 4.2 percent over the same period of 2011, before it goes up slightly by the end of the year.

The inflation rate predicted for the whole year 2012 is 8.1 percent. And if the scenario comes true, the figure would be much lower than the 9.5 percent rate predicted by the World Bank.

The inflation cooling down should be seen as a positive sign which would bring two big benefits to Vietnam. First, the low inflation rate would help stabilize the macro economy, the payment balance, and give the opportunities to Vietnam to improve the foreign currency reserves.

Second, the slow CPI increase would give favorable conditions for the government to loosen the monetary policy, thus helping push up the economic growth which has been slowing down recently (GDP growth rate was 4 percent in the first quarter).

Meanwhile, Bloomberg has shown its worries about Vietnam’s economic growth. Quoting ANZ Bank, the newswire has reported that the CPI increase slowdown has been attributed to the input material price decreases in the world market and to the low domestic demand. Besides, the worries about the banks’ health may also affect the investors’ confidence and Vietnam’s economic growth in 2012.

The China Post, while commenting that the low CPI increase is really the good news, has pointed out that the GDP growth rate of 4 percent is the lowest in the last three years level.

The newspaper believes that the CPI increase slowdown has been caused by the tightening of the monetary policies and the weakened demand from Vietnam’s export markets.

The move by the State Bank of Vietnam to slash key interest rates in recent days has been described by the newspaper as the policy response to the slow GDP growth.

People’s worries have not been lifted

The General Statistics Office (GSO) has announced that the CPI in June 2012 decreased by 0.26 percent, for the first time in the last 38 months. If compared with the same period of 2011, the current price levels are higher by 6.9 percent.

The government’s report submitted to the latest National Assembly’s session showed that the GDP may grow by 4.31 percent in the first half of 2012. However, GSO is calculating GDP growth rate again, believing that the actual figure could be 4.4-4.6 percent.

However, the information about the low inflation rate has not made people happy. Nguyen Thi Mui, a housewife in HCM City said on Tuoi tre that while press agencies report the low inflation rates, she still has to pay high for goods and services.

“Everything is getting more and more expensive. I cannot find anything decreasing in prices as reported. Cabbage, for example, which was sold at 8000 dong per kilo last month, has increased to 10,000 dong,” she said.

Thao, the owner of a rice shop at Ba Chieu Market, has affirmed that except some new kinds of new rice products, the rice prices remain unchanged. However, Nang Huong brand rice has increased by 1000 dong per kilo.

Source: VnExpress, TBKTVN

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