|Low inflation but slow growth |
According to the Ministry of Planning and Investment, inflation – the hottest issue over the past two years – has been controlled. The consumer price index (CPI) in April hit a record low over the past several months or compared to the same period of previous years. It will continue to decline in the coming months and is likely to fall at the lowest level in July and August.
However, we should not be lax because inflation is likely to return late this year or early next year like it has in several previous years. In general, inflation for the whole year will be in the single digit, maybe even below 6.5 percent.
Thanks to some improvements in the balance accounts of the first quarter, foreign currency reserves keep increasing and exchange rates remain rather stable with a 4-month drop of 1.04 percent.
Therefore, the second hot issue is trade deficit which is being lightened. However, some worry that imports in the domestic economic sector have decreased sharply because of a slowdown in production and trade.
The General Statistics Office of Vietnam said that the industrial index rose in April, but still below last year’s same month figure.
Credit growth in the first quarter dropped by 2 percent, many businesses are unable to access bank loans because of high interest rates and demanding requirements for borrowing capital.
In the meantime, others in the commodities and services sectors’ taking advantage of slow CPI growth pushed prices up.
In addition, total retail sales and services revenues failed to reach last year’s levels.
With hundreds of businesses failing to pay taxes and going bankrupt, State budget contributions dropped to a lower level.
Such depression will impact three big issues: First, the whole year’s economic growth target set by the National Assembly’s resolution will be hard to come by. Second, as a result of the Government’s efforts to loosen monetary and fiscal policies and stimulate investment and consumption; inflation will be likely to recur late this year and early next year as often seen in previous years. Third, both inflation and slow growth will make it all the more difficult to achieve the goal of ensuring social welfare.