Vietnam Govt Should Not Turn off Stimulus Tap Swiftly: Economist
The Vietnamese government should not switch off its stimulus tap now in order to avoid any shocks to the economy, Le Xuan Nghia, a leading economist and vice chairman of the National Financial Supervisory Commission, has cautioned.
Nghia was quoted by the Saigon Tiep Thi newspaper warning that foreign and local economists recently urged the government to stop its 4 per cent interest rate subsidy program, a so-called second-to-none move in the world, on concerns that inflation would return.
“If the government lowers interest rates of savings to 4 per cent now, no one in Vietnam will want to put their cash in banks, but use it to buy dollars, gold or lend on the black market; consequently, local banks will be at risks of collapse,” Nghia noted.
Nghia also called the government’s 4 per cent interest rate subsidy program an “intelligent” dose,” and pointed out that its side-effects are inflation threats in the medium-term, which may lead to accumulative bubbles of stocks and realty deals while people overspend and save less.
Given the government breaks, credits grow swiftly, and all bubbles could burst, Nghia alerted.
He also assured that the government is working on measures to curb inflation threats step by step instead.
In order to achieve the GDP growth of 5 per cent this year, the domestic economy will have to expand 5.9 per cent in the second half of this year after it bottomed out at 3.1 per cent in Q1, and turned around at 4.5 per cent in Q2, equivalent to 79 per cent of GDP growth in Q2 of 2008, the government’s General Statistics Office said. (Saigon Marketing, vnexpress)
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