Trade Deficit Alleviates; Inflation Aggravates

Consumer price index (CPI) unexpectedly climbed 1.17 percent in July on account of rising food prices. Most commodities and services climbed in prices, with food prices adding 3.2 percent. Higher food prices also entailed a considerable rise in eating out. These two factors contributed 0.9 percent to the July CPI.

 

The escalation of food prices was attributed to undersupply caused by complex diseases, storms, higher animal feed prices and higher vegetable prices.

 

Uncertainties pose a threat to the Vietnam’s economy in general and CPI in particular. As often as not CPI tends to rise in the last months in a year, we anticipate that it is relatively hard to keep CPI at 17 percent this year after climbing 14.61 percent in the seven months.

 

Given price escalation in July, pressures on inflation remain strong, price trends are complex and uncertain, and solutions to ease inflation are prone of challenges. Therefore, the SBV advocates controlling credits, particularly credits for real estate, securities and consumption in the coming time. The SBV will continue to apply tight, flexible monetary policies and cap credit growth below 20 percent (in 2011).

 

As regards fiscal policies, principles and objectives set out in the Resolution 11 will continue to be applied to ensure the budget deficit below 5 percent of GDP, reduce 10 percent of regular budgets, and trim public investment, etc.

 

I would like to confirm that the Ministry of Finance will consistently implement the market-based price for petroleum products in the spirit of the Decree 84 of the Government. To stabilise petroleum prices, in case prices rise, the State will lower taxes and [petroleum trading] companies accept smaller profits. In case prices drop, the State will resume taxes and the companies make a profit before lowering retail prices for consumers, basing on the principle of tripartite benefits: The State, businesses and consumers

 

The development trend of FDI enterprise bloc is benefiting Vietnam, specifically focusing on production, replacing low technologies with higher ones, and transferring low technologies out of Vietnam. This sector raked in US$27.8 billion from exports in the first seven months and incurred trade deficit of US$1.7 billion (excluding crude oil), equal to 12.9 percent of the country’s trade gap and 7.2 percent of this bloc’s exports.

 

According to the General Electric Diagram VII recently approved by the Prime Minister, the electricity industry will need a huge investment capital of some US$5-6 billion a year. Electricity prices are now not enough for continuous investments.

 

According to the electricity development strategy and the general diagram, electricity prices will be revised up to the market rates. This is the general orientation and specific changes will be flexibly made by the Government.

 

In general, thanks to consistent and drastic measures to curb inflation, stabilise macro economy and ensure social security in the spirit of the Resolutions of the Party, the National Assembly and the Government, socioeconomic situations gradually stabilised in July, inflation eased, trade deficit tended to narrow, foreign exchange market gradually valorised. Impressive growths were seen in some sectors. Remarkably, the export growth rate trebled the target. Retail and service revenues robustly expanded from a year ago while industrial and agricultural production was scaled up. Social security, national defence and security, political security, social order and safety were strengthened.

 

Notably, trade gap narrowed to just US$200 million in July, or approximately 2.4 percent of exports, the smallest monthly value this year. This sharp drop trimmed trade deficit to 12.9 percent of exports in the first seven months.

 

I would like to reiterate that the Government will continue directing the implementation of measures to stabilise macro economy, stave off inflation and ensure social security in a comprehensive and aggressive manner in the last months of the year.

 

I would like to convey overall remarks on the past term of Prime Minister Nguyen Tan Dung. The past term is a difficult period. But, by seriously and aggressively performing the guidance of the Party and the Politburo in combination with the proactive, flexible governance of the Government, the solidarity and unanimity of the entire political system from central to of local levels, solidarity, consensus and effort of the people and business community, we achieved remarkable results. This is an important foundation for the Government in the next term to promote achievements and withstand weaknesses to lead the country to go forth.