VINACHEM

VietNamNet Bridge – As anticipated, Vietnam’s inflation rate in 2010 reaches two-digit level at 11.75 percent. Vo Tri Thanh, Deputy Director of the Central Institute for Economic Management (CIEM), while pointing out the negative impacts of the high inflation on the national economy, emphasized that Vietnam should focus on curbing inflation in 2011, and that the task should be seen as the priority right from the first quarter.

The inflation rate in 2010 is very high at 11.75 percent. So, the year 2011 will begin with a high start?

As a rule of thumb, the inflation rate in January is always high, because this is the time just before traditional Tet, and the demand for production and consumption increases sharply. The situation will be eased gradually in February, or after Tet.

However, the first quarter of 2011 will be set in quite different conditions. The price increases of some essential goods have been scheduled for post-Tet period. Therefore, it would be not so easy to predict the inflation rate for the first quarter of 2011.

What are your viewpoints about the economic policy for the first quarter of 2011?

My viewpoint is that right from the first quarter of 2011, the Government needs to tight policies in order to obtain the most important goal for now – curbing inflation.

Some foreign institutions have forecast that Vietnam’s inflation rate in 2011 would be 7-8 percent, if the GDP growth rate would be 7.5 percent. This shows that it will be very difficult to restrain the inflation rate at below seven percent for 2011, if we still strive for high economic growth rate. Especially, the forecasts show that if Vietnam is not patient in curbing inflation, the macroeconomic uncertainties in 2011 would be even higher than in 2010.

To date, I still cannot see a clear goal in the monetary policy management for 2011. My viewpoint is that if we insist on maintaining macroeconomic stability, the credit growth rate in 2011 should not be higher than that in 2010, at about 22-23 percent. I mean that the monetary policies need to be tightened more than in 2010. With a more flexible management, the national economy will be gradually stabilized and this will help businesses avoid shocks.

How high should the inflation rate in 2011 be?

I have to emphasize that the Government should be determined to curb inflation. Even the seven percent inflation rate would be too high, which will lead to the difficulties in macroeconomic management. Especially, this will make the policies on interest rates and exchange rates consistent. The high inflation will also lead to the decreases in the cash flow to the production sector, while this will encourage short term speculation.

Of course, we should not dream of setting the inflation rate at low levels of three or four percent like in developed economies, because the sharp reduction of the inflation rate from 12 percent to 3-4 percent would cause shocks.

I personally think that we should set the target of six percent in inflation rate in 2011.

The task of curbing inflation should be realized at a reasonable pace with the combination of both monetary and fiscal policies

If so, the economic growth rate may decrease, and businesses may meet difficulties. However, in a transparent macroeconomic environment, businesses will be able to adjust and restructure their business with a long term vision