Vietnam needs to attain a gross domestic product (GDP) growth rate of atleast 6.5 percent to steer clear of deflation risks, an expert said onJune 30 given the slowing inflation rate over the past year.
At a workshop in Hanoi, Deputy Director of the Academy of Finance’sInstitute of Economics and Finance Nguyen Duc Do said with 6.5 percentGDP growth, inflation could be around 1.68 percent – an appropriatefigure for the contemporary economic context.
If the economy expands at 6-6.25 percent, the possibility of deflation is real, he noted.
As GDP increased by 6.28 percent in the first half of 2015, deflationis more likely than the rebounding high inflation, which is why theGovernment set the GDP growth target of 6.5-7 percent for 2016-2020, headded.
A report at the workshop further explainedthat the consumer price index (CPI) in June climbed 0.55 percent againstDecember last year and 1 percent from the same period of 2014.Inflation pace in the last year slowed considerably and Vietnam’seconomy is now close to 0 percent inflation rather than the targetedceiling rate of 5 percent.
In the first two quartersof this year, 2 percent VND/USD exchange rate adjustments led to a CPIhike of 0.6 percent while the 8.42 percent augmentation in electricityprices contributed a 0.22 percent gain to the index. As such, the slowsix-month inflation was mainly driven by costs, not by demand.
Do said since 2008, Vietnam’s economic growth has been continuallybelow its potential of 6.5 percent, meaning the increase of aggregatedemand was lower than that of aggregate supply, dragging inflation down.
He stressed interest rates need to be cut down,especially lending rates since the current positive real lending rate isabout 7.5 percent, much higher than the actual GDP gain, hamperingbusiness efforts to broaden their operations.
Spending money on buying bonds will make it more favourable to reduce interest rates and boost credit, he noted.-VNA
At a workshop in Hanoi, Deputy Director of the Academy of Finance’sInstitute of Economics and Finance Nguyen Duc Do said with 6.5 percentGDP growth, inflation could be around 1.68 percent – an appropriatefigure for the contemporary economic context.
If the economy expands at 6-6.25 percent, the possibility of deflation is real, he noted.
As GDP increased by 6.28 percent in the first half of 2015, deflationis more likely than the rebounding high inflation, which is why theGovernment set the GDP growth target of 6.5-7 percent for 2016-2020, headded.
A report at the workshop further explainedthat the consumer price index (CPI) in June climbed 0.55 percent againstDecember last year and 1 percent from the same period of 2014.Inflation pace in the last year slowed considerably and Vietnam’seconomy is now close to 0 percent inflation rather than the targetedceiling rate of 5 percent.
In the first two quartersof this year, 2 percent VND/USD exchange rate adjustments led to a CPIhike of 0.6 percent while the 8.42 percent augmentation in electricityprices contributed a 0.22 percent gain to the index. As such, the slowsix-month inflation was mainly driven by costs, not by demand.
Do said since 2008, Vietnam’s economic growth has been continuallybelow its potential of 6.5 percent, meaning the increase of aggregatedemand was lower than that of aggregate supply, dragging inflation down.
He stressed interest rates need to be cut down,especially lending rates since the current positive real lending rate isabout 7.5 percent, much higher than the actual GDP gain, hamperingbusiness efforts to broaden their operations.
Spending money on buying bonds will make it more favourable to reduce interest rates and boost credit, he noted.-VNA
