NA Deputy talks about inflation and economic policy

Dantri/DTiNews held an interview with National Assembly Deputy Tran Du Lich from Ho Chi Minh City about the inflation rate this year amid the rising CPI to date.

Deputy Tran Du Lich

Vietnam’s consumer price index (CPI) in the first ten months of this year has increased against December 2009, nearing the target of 8% set by the government. What are your comments on the CPI so far this year?

I think that it will be a success for Vietnam to maintain CPI at one digit. The rate of 7% set by the National Assembly and then raised to 8% by the government is only the target figure. But, in fact, many economists, and I myself, warned in late 2009 that Vietnam must strive to curb the inflation rate at one digit in 2010.

Unlike many other countries, which have focused on loosening monetary and financial policies for economic growth in 2010, Vietnam is boosting economic growth, while it must be cautious about inflation.

Inflation originates from the Vietnamese economic structure which often faces trade deficit. In my opinion, the country’s inflation rate could be at around 9% in 2010.

Did you find any abnormalities on the CPI chart from January to October?

Vietnam’s CPI has been different from recent years due to late impact of stimulus policies last year as well as the government’s investments for major projects.

In 2009, the government issued bonds worth VND45 trillion (USD2.3 billion) and Vietnam held many big festivals and events this year. These are among the main causes resulting in high CPI in the first ten months.

In the two remaining months of this year, it is the time for many big projects to disburse, increasing cash flow. Thus, Vietnam must try to maintain CPI at about 9% for the whole year of 2010.

If we fail to keep inflation at one digit, this will result in both economically and socially psychological impacts because inflation is an invisible tax imposed on people.

As you have said, the government bond issuance of big value is among the reasons for inflation. This year, the government said in a draft decree that it would reduce government bonds. Do you think it is reasonable?

I think the most important thing is enhancing efficiency of state budget-funded investments. We should prioritise key projects, instead of massive investments. We cannot stop selling bonds because there are many incomplete projects.

How will the current inflation rate affect the goal of lowering lending interest rates?

The government wants lower lending interest rates but it needs more time because this depends on supply and demand of credit and inflation.

If the net return is too low, people and enterprises will not deposit into banks but instead hoard dollars and gold. This will harm the national economy.

However, the government needs to make further pledges to curb inflation in 2010.

The monetary and financial policies seem to be opposite together. According to a report by the government, development investments for this year have increased by 43% against the figure approved by the National Assembly late last year. What can you say about this?

This is a wonder. Since early this year, the national monetary policy is being further tightened to control inflation, but the financial policy is loosened. This is a weakness in the economic management.

Thanks you!