Business
Restraining inflation rate at 17% poses major challenge
  • | dtinews.vn | July 22, 2011 10:01 AM

>> Vietnam\'s inflation likely to touch 20pct: HSBC

>> In 2011, inflation will be the biggest challenge: MPI

Vietnam will struggle to restrain inflation at 17% in 2011, said head of the National Assembly’s Committee for Economic Affairs Ha Van Hien.

PM Nguyen Tan Dung and President Nguyen Minh Triet at the meeting

Hien made the statement on the first working day (July 21) of the 13th National Assembly’s first session to elect new leaders for the next four years.

In a report reviewing the country’s socio-economic situation in the first six months of this year, Hien said Vietnam’s price consumer index (CPI) increased 13.29% against December 2010, raising the nation’s CPI in the period by 16.03% against the same phase of 2010.

Prices of many goods and services have continued sharply rising, affecting people’s lives, particularly three million poor households and 1.6 million which are near the poverty line as well as low-income groups.

According to the report, businesses continue to face operational difficulties due to capital shortages and high interest rates. Between January and June, deposit interest rates rose by 2.9% on average compared to late 2010. The gulf between deposit and lending interest rates remains. As a result, many have to scale down their scale of operations or halt production altogether.

The stagnant business situation may lead to an increase in bad debts in the remaining months of 2011 and into the next year.

Hien noted that in the first half of the year the country’s trade deficit accounted for just 15.7% of the total export value in the period, compared to the set target of 18%. However, the lower trade deficit is being fuelled by the increased export value of rare metals.

Deputy PM Hung sets single digit inflation target for 2012

Deputy Prime Minister Nguyen Sinh Hung speaking at the meeting

At the meeting on July 21, Deputy Prime Minister Nguyen Sinh Hung summarised the socio-economic situation and state expenditure in the first six months and mapped out the tasks and measures for the second half of the year.

Vietnam needs to achieve the GDP growth of 6% this year and 6.5% in 2012, Hung said, adding that CPI rate should be kept at 15-17% in 2011 and single-digits next year.

According to the Deputy PM, one of the major reasons for Vietnam’s high inflation is the affect of high food and petroleum prices as well as soaring inflation in many countries.

The government’s USD8 billion in 2009 stimulus package may also have contributed to the increased CPI. Salary rises for state employees and increased power and petroleum prices are also attributed to a higher CPI, Hung further explained.

The Deputy PM highlighted that in the second half of this year, Vietnam will focus on measures on controlling market prices to avoid sudden price hikes in essential goods. The country will limit the imports of luxury products and closely control the import of consumer goods, particularly those affecting people’s health and environment.

The government also urged the National Assembly to approve a plan to reschedule the payment of corporate income tax for small and medium-sized and labour-intensive enterprises this year until 2012. The delayed tax will cost the State budget VND6.9 trillion (USD334.9 million).

Leave your comment on this story