Vietnam Torn Between Impacts of Inflation and Deflation-Economists

Vietnam’s economy and local businesses are torn between unsolved impacts of inflation and emerging risks of deflation, which can be demonstrated with high production costs and sluggish sales of goods due to shrinking consumer demand as CPI declined by 0.19 per cent on month, economists are quoted as saying on October 28.

 

Former Minister of Trade Truong Dinh Tuyen told reporter of the Lao Dong newspaper on the sideline of a workshop on macroeconomic challenges and difficulties and proposals by small and medium enterprises held Oct 26 that Vietnam’s economy may face risks of deflation.

 

“Vietnam sees slower pace of exports due to impacts of the global economic crisis, which will pull down GDP value and make investment cool down, all these factors we [Vietnam] should take into account,” Tuyen proposed.

 

“The macro situation has now changed, I wonder whether Vietnam should shift to deal with economic recession because if we combat ardently inflation, which will likely worsen macroeconomic conditions to hurt GDP growth and trigger unemployment,” Tuyen said.

 

Shared views with former Minister Tuyen, Prof-PhD Cao Cu Boi affirmed the need to shift to cope with deflation risks from inflation.

 

PhD Nguyen Dinh Cung from the Central Institute for Economics Management (CIEM) under the Ministry of Planning and Investment said that local companies have been facing double-fold difficulties since the start of the year, including impacts caused by inflation which are not yet solved and now difficulties from deflation.

 

Construction steel sales have decreased by a third to 100,000-110,000 tons a month from 330,000 tons/month in the past and all the steelmakers have to moderate or even halt their production, Dinh Huy Tam, head of the Vietnam Steelmakers Association.

 

Nguyen Chi Thien, vice chairman of Ho Chi Minh Food and Foodstuff Association said it is more difficult to fight deflation than inflation.

 

To effectively deal with deflation now is increasing investment, Associate Prof-PhD Ngo Tri Long-a lead economist of Institute of Finance proposed.

 

However, Ms Tran Thi Hang, head of the General Statistics Department’s Price, Service and Trade Division said that it is too early to say “deflation” now because CPI in Oct reduced by 0.19 per cent, particularly sharp drop in prices of construction materials for the first month. Total spending by Vietnamese people this month eased at 2.1 per cent on month, bringing the total spending in Jan-Oct to soar 30.7 per cent.

 

“It is rather difficult to forecast CPI because it depends on many unexpected factors,” Hang said, predicting the country’s GDP growth rate will be 6.5 per cent-7 per cent on quarter. (Labor)