The Vietnamese government has allowed a serial rise in selling prices of essential commodities like electricity and petroleum and foreign currencies. According to experts, this is part of an inflation taming scenario for 2011.
To date, no authority has confirmed a chosen inflation curbing scenario for 2011. But, with the moves from authorities in the past two months, some economists anticipated this was part of a carefully calculated regulatory plan.
In late February and early March, prices of many input commodities like electricity, petroleum and exchange rates started to rise. According to Finance Minister Vu Van Ninh, price rises of these commodities in addition to other effects will add 2 percent to CPI in 2011.
Previously, the General Statistics Office (GSO) said the consumer price index climbed 3.78 percent in the first two months of 2010, primarily owing to New Year effects. The expected effect of price rises will raise CPI to near 6 percent. With the target of keeping CPI at 7 percent this year, this leaves only a 1 percent increase for the remaining 10 months.
According to economic experts, Vietnam can hardly keep inflation at 7 percent or lower in 2011. “The increases in energy, electricity and petroleum indicate that we are going to see inflation get a little worse despite the shift in government policy," Christian de Guzman of Moody's Investor Group said to BBC.
At present, the message of macroeconomic stability and inflation taming is continuously broadcasted by authorities. A government official affirmed that this is the “leading, resolute and thorough” goal for this year.
This determination is translated into a package of seven solution groups announced by the government in late February, which highlighted tightening monetary policy, reducing budget and trade deficits, expanding production, and applying market-oriented price mechanism.
Remarking on this solution package, Guzman said this is a step in the right direction and necessary for Vietnam in the context of inflation as a potential risk for most emerging economies in Asia.
Meanwhile, according to Dr Tran Du Lich, member of the Vietnam National Advisory Council for Monetary and Financial Policies, the Government’s decisions to adjust prices of some commodities toward market orientation and its determinations to stave off inflation are in fact not contradictory. "This is just part of the required solution to fight against inflation," said Mr Lich.
According to experts, these changes will raise consumer prices in the short term but help stymie inflation expectations which have persisted in our economy. “The target of 7 percent inflation set for this year will be used up in the second quarter but it will be better for the rest of the year,” he noted.
“If prices keep inching up over a long time, a baseless rumour will also threaten many people. It’s better to make a big change and keep it stable for a long time than let people and enterprises live in fear. Then, we can put an end to expecting inflation,” he added.
Many financial companies had a common voice with Dr Tran Du Lich. An official from BIDV Securities Company said the increases in electricity and petroleum might cause inflation to climb 2 percent in both March and April but the situation might be eased in the last months of the year when consumer confidence was restored.
However, some experts pointed out that the success of this inflation scenario requires enormous efforts from authorities and depends on world markets, especially when global inflation is showing signs of growth.
“To see global impacts on Vietnam, we can take crude oil as an example. The current oil price is at US$100 per barrel but it will climb to US$120 if instability in Africa and the Middle East cannot be resolved soon. If oil price adds US$20 per barrel, we will lose 1 percent of growth and its impacts on inflation are greater,” said Dr Nguyen Duc Kien, member of the National Assembly’s Commission on Economic Affairs.
In addition to external influences, according to Dr Kien, another pressure on consumer prices also needs to be taken into account: Salaries for workers will be increased in the middle of this year. “Inflation pressures may strengthen in the middle of this year.”
Meanwhile, according to specialist Vu Dinh Anh, in 2010, prices of some commodities were raised in the first months of the year in an attempt to ease inflation growth in the last months but the year still ended with double-digit inflation.
“This year, the rate of increases is higher than that of last year. Plus external pressures, it is a very hard task to curb inflation,” said Anh.
P.V
Vietnamese
