In the recent interview given to Thoi bao Kinh te Vietnam, he stressed the inflation rate in 2010 would depend on how the Government regulates the national economy.
VietNamNet Bridge – Dr Vu Dinh Anh, deputy dead of the Market and Price Research Institute under the Ministry of Finance thinks the inflation rate in 2010 will be higher than that of 2009.
Thoi bao Kinh te Vietnam: Why do you think that the inflation rate in 2010 will depend on the Government’s management policies?
Anh: I still cannot see any factors that could be the driving force for the economic growth in 2010. I don’t think that we can increase investments further, because we have increased investments sharply already.
The state budget deficit for 2010 at 6.2 percent of GDP, I think, is a little high. Therefore, we will have to tighten spending. If the credit growth rate is curbed at 25 percent in 2010, we would not have enough power to obtain growth rate of 6.5 percent
In general, I cannot see any factors which can support high economic growth rate of 6.5 percent.
Therefore, the Government would have to apply an “open policy” for some sectors in order to stimulate economic growth. If the policy is too open, this may become uncontrollable and lead to high inflation. This would be a worrying thing. That is why I say that the inflation rate in 2010 would depend on the Government’s policies.
TBKTVN: But the Government has tightened its policies?
Anh: Regarding the import-export activities, we have to strive to curb the trade gap in 2010, or to put it another way we have to restrict imports. If we can do that, the negative impact created by the world’s prices on domestic prices will be minimized.
The impact of the world’s prices on Vietnam always relate to the exchange rate. Meanwhile, I think that we will not make any more dong/dollar exchange rate adjustments in 2010 following the strong adjustment in 2009.
The State Bank of Vietnam has raised the basic interest rate, a move that aims to withdraw money from circulation.
In general, if the Government has decided to put macroeconomic stability as its top priority, the prices of goods and services on the market should be more stabilized.
TBKTVN: Do you mean that the world’s economy recovery and international price increases will not have a big impact on domestic prices?
Anh: I think that prices will increase, but this will not be a shock.
TBKTVN: Some analysts say that the factor that will have biggest influence the inflation rate in 2010 is the monetary policy which has been loosened for the last several years. What is your comment about that?
Anh: The total money supply M2 is some 28 percent, while credit growth rate is 37.7 percent. I cannot see any problem with M2. The bigger worry should be the credit growth rate. However, the Government has tightened monetary policy already since the end of 2009.
TBKTVN: What are the scenarios for 2010’s inflation?
Anh: The Government forecasts the inflation rate at seven percent in 2010. Meanwhile, some international organizations have forecasts a higher level of 10 percent.
I personally think that there are two scenarios for 2010.
First, if the Government has reasonable management policies, if it can well adapt to the changes of the world’s economy and well harmonize the stability and economic growth rate, the inflation rate will be above seven and less than 10 percent.
In the second scenario, if the Government makes a wrong move, or it prioritizes the economic growth and inflation is 12 percent or even higher. In this case, what happened in 2007 may be repeated in 2010. In that year, the inflation rate was high at 12.63 percent, because the Government strived to obtain the high economic growth rate of 8.5 percent.
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