This was a common view shared by
many experts with experience in price management at a workshop on price and
market developments in 2012 and forecasts for 2013 held in Hanoi last Thursday.
The most basic reason is that
Vietnam’s economic structure has not changed much, said Vu Vinh Phu, chairman
of the Hanoi Supermarket Association.
“As long as public investment
remains rampant and the economic structure lags behind, inflation will still exist,”
he said.
He remarked the country’s
resources had been allocated unreasonably, leading to high inflation. “Small
and medium-sized enterprises create a lot of jobs, yet they receive little
care, while inefficient State-owned enterprises are given hefty investments,”
he explained.
“If the economic mindset was not
changed, if resources were not reallocated, then true entrepreneurs would
continue to face capital shortage, resulting in inflation,” he stressed.
Sharing this view, Nguyen Tien
Thoa, vice president cum general secretary of the Vietnamese Valuation
Association, said: “The risk of inflation will remain intact next year. The
root cause lies within the economy: poor competitiveness and low capital use
efficiency, coupled with the impact of external factors, which may fuel
inflation.”
The restructuring program has
just gone through one year and thus it cannot remove the underlying cause in
the economy, he said.
Nguyen Ngoc Tuyen, director of
the Institute of Economics and Finance, noted the Government at the same time
aims for two opposite targets, lower inflation and higher growth, making it
very difficult to decide on policy.
“Without capital injection, there
won’t be growth, but with it, there will be inflation,” he explained.
Ngo Thi Anh Duong, deputy
director of the Price Statistics Department under the General Statistics
Office, reminded that 30 provinces still had not adjusted their hospital fees.
Hospital fee hike is the biggest cause of the consumer price index (CPI) growth
in September.
“I am concerned that if these 30
provinces simultaneously raised their hospital fees, CPI might pick up a few
percentage points,” she said.
Still, economists did not give
any forecast for inflation next year. Meanwhile, it is believed that the reason
for low inflation this year is the purchasing power of citizens and businesses
have been exhausted, instead of efficient management.
Phu of the Hanoi Supermarket
Association said: “It is the sharp decline in demand that has pulled down
inflation rather than the decisions of the Government. Purchasing power has
been exhausted. With monthly income of only VND2-3 million, workers in
industrial parks can only pay for their meals.”
Thoa added: “An important reason
for low inflation is the difficulties of the economy. Producers are mired in
troubles due to inventory and bad debt. As they cannot sell their products,
they cannot increase prices. Weakened aggregate demand and stagnant production
keep prices from going up.”
Even when the central bank spends
some VND200 trillion buying US$10 billion this year, just as in 2007, it does
not cause inflation. “Three main factors, bad debt, inventory and falling
aggregate demand, make CPI unable to rise, even though there are potential
factors to sharply push up prices recently,” said Thoa.
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