VINACHEM

Governor of the State Bank of Vietnam (SBV) Nguyen Van Binh has asked for special attention to inflation as it could surpass the below-5-percent target set by the National Assembly for 2016.

At a teleconference between the Government and ministries, sectors and localities on December 29, Binh stressed that very little room remains for decreasing prices of essential goods, especially crude oil.

While prices of the State-controlled commodities could hike, the pressure of the economic growth target of 6.7 percent next year might also push inflation out of control.

He noted that the low inflation in 2015 (less than 1 percent) was mainly contributed by external factors, especially the falling global prices of oil and other staples. This year’s inflation could be around 3 percent if those factors were excluded.

Binh requested ministries, sectors and localities have a firm grasp of prices, particularly essential goods.

Additionally, the SBV will strive to maintain overall interest rates as stable as in 2015 or cut down average mid- and long-term lending rates by 0.3 – 0.5 percent, the Governor said.

He cited the fact that the current average interest rates have already been appropriate for the inflation goal of under 5 percent, thus a sharp rate decline is unlikely.

The central bank will also work to keep exchange rates stable but not fixed, he noted, adding that new exchange rate mechanisms will be introduced in early 2016 so as to align domestic exchange rates with international financial and monetary vagaries, ensuring both flexibility and stability.

Meanwhile, a credit growth rate at less than 20 percent will match the targeted economic growth of 6.7 percent and support the bond market as a relatively large volume of bonds are expected to be issued next year.

Binh concluded those policies are feasible in 2016 and could guarantee macro-economic stability and economic recovery.