Nguyen Duc Thanh of the Hanoi National University said the mistakes of the monetary policy in 2007 caused inflation to shoot up in 2008, and the spillover effects were still felt now.
“The worst concern is that such mistakes are prolonged. Policymakers are confused and the economy has to suffer,” he said.
Thanh said the banking system was becoming even more instable with rising bad debts, low asset values, alarming liquidity, sky-high lending rates and lowered deposit rates.
Nguyen Thi Kim Thanh, director of the Banking Strategy Institute, said the central bank found itself stuck with many targets to achieve such as curbing inflation and stabilizing the monetary market.
In the middle term, when the financial market and the bond market develop, the burden of the monetary policy will be relieved. However, capital pressure will remain high until 2015, making it necessary to expand credit, Thanh said.
She proposed the central bank should continue to tighten credit from now to 2014, because once credit is loosened, people will invest in efficient sectors, making it hard to tame inflation.
Former trade minister Truong Dinh Tuyen said the establishment of an independent central bank was worth considering.
Without this model, Vietnam will always struggle with the impossible task of balancing fixed exchange rates and free capital flows and monetary independence.
Thanh of the Hanoi National University said the gap of 10 percent between saving and investment was another cause of macro-economic instability in Vietnam.
The economic growth model focuses on promoting investment but investment quality is going downhill. State-owned enterprises waste their huge resources in irrelevant and inefficient investments.
The model to develop the economy in width requires boosting investment, which has widened the gap between saving and investment, Thanh explained.
The gap is often evened out by foreign capital sources, but as foreign resources dwindle, domestic capital is used instead, causing inflation and instability.
Former minister Tuyen shared Thanh’s view, saying the fact that the majority of investment capital was allocated to inefficient State firms resulted in the vicious cycle of inflation.
He said these weaknesses had been pointed out before, but it was hard to overcome them.
Meanwhile, chief economic expert of the World Bank Deepak Mishra said though tax collection made great contributions to the State budget revenue, Vietnam had to fulfill debt obligations in the coming time, which would likely lead to the State budget deficit.
If the State budget deficit continued to stay high, it would be difficult to stabilize the macro-economy, Mishra said.