Mounting pressure on inflation control in 2013

Inflation might be well controlled in the remaining months of this year, but it is no easy task to do this in 2013, say economists.

Leading economists and financial experts from Vietnam and abroad who attended a seminar on macroeconomy in Hanoi on June 28 pointed out several difficulties facing the national economy in the near future.

They also discussed measures to deal with issues related to bank liquidity and marco-economic challenges and to help local businesses iron out their snags.

In the first half of 2012, Vietnam’s economy has achieved a slow but stable growth rate. Hot economic issues have been gradually settled, thus boosting the restructuring of the national economy.

Dr. Dao Van Hung, Director of the Policy and Development Institute, said that the six-month economic growth rate is estimated at 4.5 percent, a figure which is even lower than last June’s 5.71 percent, and much lower than the yearly target of 6-6.5 percent set by the National Assembly.

Hung noted that local businesses are suffering numerous difficulties due to a severe shortage of investment capital and a large volume of inventories. Many went bankrupt, while others either suspended production or suffered significant losses.

Moreover, he said, total retail sales and consumer services also experienced slow growth. The consumer price index in the first half was much lower than the predicted figure. The foreign and State-invested sectors proved ineffective over the period.

Instability in foreign exchange rates may lower export revenue in the coming months. In addition, local businesses have still found it difficult to access bank loans due to high interest rates. This has put pressure on the domestic monetary market and caused a negative impact on the equitisation process of State-owned enterprises (SOEs).

According to Hung, Vietnam is facing huge challenges relating to policy as the country drives itself to a market economy status.

Many participants voiced their concern over the government’s recent policies that are designed to cope with monetary and fiscal shocks in Vietnam and the world. These policies successfully settled immediate problems, but may cause new obstacles to the national economy, they said.

They were concerned about the Government’s proposed measures to loosen the monetary and fiscal policy in the near future. Moreover, they said, the current freeze in the real estate market, the increasing number of bad debts by businesses and commercial banks and the ineffectiveness in business operations may pose more challenges to the national economy in the year to come.

Economists emphasised the need to ensure sustainable economic growth by controlling public expenses, boosting exports, attracting more investment from private and non-State sectors and promoting individual consumption.

Besides, they said, it is essential to take measures to increase total demand, remove the ceiling interest rates, offer preferential loans to producers, help small-and-medium enterprises (SMEs) access credit loans, increase bank liquidity, settle bad debts, and speed up the SOE equitisation process.