The easing of inflation in recent months was mainly due to very slow
consumption, which has caused the economy to stay sluggish, financial experts
said at a conference Wednesday.
There were favorable conditions
in both international and local markets for consumer prices to fall, but low
domestic demand was the main reason, news website VnExpress cited the experts
as saying.
They forecast inflation will only
be between 6 and 7 percent this year, after prices fell 0.26 in June percent
from the previous month.
Economist Nguyen Minh Phong said
now that retail and property markets have declined, the economy will no longer
be able to absorb a large amount of money supply from the central bank.
He said more than 300 trillion
dong has been injected into the economy, mostly into the banking system, but
businesses are still reluctant to borrow.
Vu Vinh Phu, chairman of the Hanoi
Supermarkets Association, said consumers, especially retirees, have cut back on
spending sharply.
“So it’s easy to see why the
inventory level of local firms has reached 30 percent,” he said.
The central bank has cut interest
rates five times this year in order to boost economic growth. It has also
ordered commercial lenders to lower rates and offer loans to strategic sectors.
Phong said while it’s necessary
to lower interest rates, the government should do it cautiously to avoid
fueling inflation.
The International Monetary Fund
said earlier this month that Vietnam’s inflation can decline from an average of
18.7 percent in 2011 to 10.75 percent in 2012 as food prices stabilize and also
due to base effects. It is projected to gradually decline to 5 percent by 2017
as macroeconomic conditions stabilize, and remain at that level through 2031.
Thanh Nien
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