Macro-economic Stability Expected

As the first session, before putting up economic and social issues for discussion, the lawmaking body had completed the most important content concerning high-ranking personnel. Mr Nguyen Sinh Hung was elected the Chairman of the National Assembly; Mr Truong Tan Sang was elected the State President; and Mr Nguyen Tan Dung was re-elected the Prime Minister.

 

The National Assembly boisterously debated social and economic situations, with mounting concerns over too high inflation. This is also the challenge to the Government.

 

Most deputies expressed their worries over too high inflation. Tran Hoang Ngan, Vice Rector of HCM City Economics University and Member of the National Financial - Monetary Policy Advisory Council, said the forecasting was terrible. While inflation was projected to be capped at 7 percent this year, it may top 17 percent.

 

Inflation is viewed as the culprit for the terrible falling quality of growth and the eroding public confidence in local currency. Some deputies asked the Government to find out the cause of inflation and assigned responsibility for failing to control inflation to the Government.

 

While the Government attributed rising inflation to various factors, such as recent economic stimulus, persistent trade deficit and latest salary increase, Deputy Huynh Ngoc Dang of Binh Duong province frankly said the stimulus package was not the core reason of high inflation but structural weaknesses of the economy and growth model in couple with weak administration.

 

Deputy Dong Huu Mao (Thua Thien - Hue) took a dim view of slow response to inflation. He demanded the Government to make a clear report on this aspect in the next meeting scheduled for late this year.

 

High inflation reduces growth quality, poses the threat of bringing many people back to poverty, and reduces the real value of income. Rising price is a topic of public concern and a top agenda at the National Assembly. Vice Chairperson of the National Assembly Nguyen Thi Kim Ngan concluded that many deputies highlighted many problems and requested the Government to draw experience and introduce effective measures to deal with weaknesses in macroeconomic administration and social management. She asked the Government to be more aggressive to realise eight groups of measures it had reported to the National Assembly at this session to achieve inflation target, stabilise macro economy and ensure social security.

 

Perhaps, the toughest challenges to the Government are to stabilise macro economy, control inflation, curb trade deficit and reduce public debt among others.

Impacts of the global economic downturn in couple with inherent instability, Vietnam is always in trouble since it joined the World Trade Organisation (WTO) in 2007. In 2008, inflation galloped, trade deficit peaked and macro economy destabilised. Then, growth slowed down to a record low and businesses were in dilemma, forcing the Government to adopt economic stimulus to avert deflation. In 2011, inflation returned with rising fears of a worse macroeconomic situation than 2008.

 

The Government adopted the Resolution 11 in an effort to rein in inflation and strengthen macroeconomic stability. It has repeatedly reaffirmed its resolute pursuit of these objectives. At the regular cabinet meeting for July - the debut assembly of the new cabinet, Prime Minister Nguyen Tan Dung stressed that ministries, central agencies and localities were not allowed to neglect the objectives of curbing inflation, stabilising macro economy, ensuring social security and maintaining growth at a reasonable rate. He directed competent authorities to continue applying tightened monetary policy, ensure the safety of the banking system, and lower lending rates. The Government reconfirmed the priority granted for manufacturing activities and in-depth investment to improve the competitiveness of Vietnamese goods.

 

As rising food prices lifted up consumer price index, the Government directed the broader development of agricultural, husbandry and fishery production, while urging competent bodies to increase breeding stocks, stabilise feed prices and positively respond to disease epidemics.

 

Consumer price index is forecast to rise in August. Rising stockpile in many industries will hinder efforts to ease inflation, and boost up production, business and export. Food prices are more difficult to be predicted because of more natural disasters and flooding. Meanwhile, ongoing gold fever is entailing pressures on currency market. Credit crunch policy applied to non-manufacturing sectors like securities, real estate and consumption is sending companies of these fields into dilemma.

 

The Government is taking on very heavy tasks. The public and business community are pinning hopes on early macroeconomic stability to entice capital flows from production activities rather than non-manufacturing fields like gold, land, and foreign currency.