Experts forecast inflation at 6.5%
By Lan Nhi - The Saigon Times Daily
HANOI – The Government has forecast that inflation will reach 7-8% this year, but economic experts have predicted a lower rate of less than 6.5%.
“If the Government doesn’t make forceful policy interventions in the market, Vietnam’s inflation in December 2012 will only pick up 6-6.5% year-on-year,” said Pham Minh Thuy, head of the market and price research department under the Institute of Economics and Finance. He was speaking at a seminar on price fluctuations in the year’s first half and predictions for the second half held in Hanoi on Thursday.
Many economic experts joining the event on Thursday shared Thuy’s view. Based on price fluctuations in the first six months and factors affecting the price index, expert Ngo Tri Long forecast inflation for the whole of 2012 would be around 5.5-6%.
Vu Vinh Phu, chairman of the Hanoi Supermarket Association, said stagflation emerged in the early months, meaning inflation slightly inched up while production stagnation and consumption slowdown caused great worry.
He stressed the agro-fishery sector had constantly run into trouble with good crop-poor price and shrinking purchasing power.
He said: “A dozen coconuts in Ben Tre are sold for a mere VND10,000-12,000, while in the north, a coconut is priced at VND15,000. A kilo of first-grade tuna in the south is priced at VND300,000, but if traders push down prices to the level of third-grade fish, the price will be a mere VND120,000.”
Producers are tired of such a situation, Phu said, and thus both producers and consumers suffer losses, adversely affecting supply-demand. He noted many farmers had abandoned their farms while fishermen had left their boats.
Nguyen Loc An, deputy director of the Domestic Market Department under the Ministry of Industry and Trade, added: “As for foodstuff, undersupply may occur in the final months of the year as more and more farmers quit their farms due to poor consumption and blue-ear pig disease.”
As a result, multiple farming households and enterprises have evaded taxes and failed to fulfill their financial obligations, leading to a series of social-economic consequences, said Phu.
Arrears and bankruptcy spark growing concerns, especially for real estate, steel and seafood processing. Quite a number of enterprises have switched from production to trading, but they lack the resources to restructure in depth, meet the requirements of the Government and the demands of more rigorous competition.
To deal with production stagnation and consumption slowdown, Phu deemed it necessary to prop up consumers’ demand, so that inventory will be reduced and enterprises can carry on production.
In addition to the Government’s policies on tax exemptions, reductions and payment extensions, there should be stronger measures such as slashing corporate income tax from 25% to 15-18% in 3-5 years. Furthermore, value-added tax exemption should be given to shoppers at retail stores and supermarkets nationwide.
In the agricultural sector, to ensure a 20-30% profit margin for farmers, it is a must to form a distribution chain directly linking wholesale and retail sales, eliminating unnecessary intermediate stages.
However, in Resolution 26 issued on Monday, the Government does not mention corporate income tax and value-added tax holidays but only focuses on tax exemptions, reductions and payment extensions that have been announced in the past.