The year's target of a 5 percent increase in the consumer price index(CPI) is feasible amid encouraging results for inflation and pricecontrols in the first six months of 2015, Nhan Dan (People) onlinenewspaper reported, adding that the CPI and inflation control shouldcreate momentum for GDP growth.
The CPI, an indicator ofinflation, increased by 0.55 percent in June compared to December 2014,and 1 percent over the same period in 2014, according to the GeneralStatistics Office (GSO).
But the figures marked the lowest JuneCPI since 2001, said Deputy Director of the Academy of Finance’sInstitute of Economics and Finance Nguyen Duc Do. He noted that the rateof inflation in the past year has slowed noticeably and the economy isnow relatively close to an inflation rate of 0 percent - far from thetarget of 5 percent.
Do said concerns about a low rate ofinflation were raised in 2014 when inflation in December 2014 decreasedby 1.84 percent over the same period in 2013, attributed to the sharpdecline of petrol prices. However, in the past six months, inflation hasbeen mainly driven by the higher prices of electricity, the exchangerate and health services, but not petrol prices.
According to theGSO, a 2 percent VND/USD exchange rate adjustment led to a CPI increaseof 0.6 percent, and a 8.47 percent rise in electricity prices led to a0.22 percent increase in the CPI. Do added that the six-month inflationrise was mainly fuelled by costs, but the low inflation pace in the pastyear was due to lower aggregate demand than aggregate supply.
Henoted that since 2008, economic growth has always been lower than thepotential of 6.5 percent, which means the increase in aggregate demandwas lower than that of aggregate supply, pulling down inflation. Thedownward trend of inflation will stop when the economic growth rateincreases to 6.5 percent or above.
Economist Ngo Tri Long saidinflation over the past six months posted a 0.55 percent increasecompared to December 2014, equivalent to nearly a tenth of the year'starget - the lowest figure in the past 14 years. Thus, the year's targetof less than a 5 percent increase in the CPI is achievable.
Longemphasised that low inflation will create positive impacts onsocio-economic development, making investors and enterprises feelsecure, creating favourable conditions for policy makers and managers toput forth and implement measures to remove barriers to production andbusiness activities. But effective control of inflation must create adriving force for GDP growth, he added.
Long said GDP increasedby 6.28 percent in the first six months of this year - a relatively highlevel for recent years - indicated economic recovery. It is expectedthat the GDP growth rate for the entire year will reach 6.2 percent.Despite the high growth rate, a number of economic factors have yet tobe improved, requiring greater efforts from the Government including ahigh trade deficit, and a large number of bankrupt enterprises amongothers.
The Government set a target of reaching an annual GDPgrowth rate of 6.5 percent-7 percent in the 2016-2020 period to avoiddeflation - but attaining this growth is a significant challenge. Dosaid the reduction of interest rates, particularly the lending rate, isone of the prerequisites for achieving this target.
In the2012-2014 period, the State Bank was successful in lowering interestrates, reducing inflation and stabilising the exchange rate and the goldmarket, which was attributed to the flow of cash into the bonds market.Do noted that when the money flows into bonds, the pressure on theexchange rate will decrease, creating good opportunities for loweringinterest rates and issuing government bonds, as well as increasingcredit growth and allowing the easier settlement of non-performingloans. Thus, it is advisable to put money in bonds in the currentcontext, Do said.
Meanwhile, Head of the State Bank of Vietnam'sBanking Strategy Institute, Nguyen Thi Kim Thanh said monetary controlshould be at the top of the list, along with a balance between thesupply and demand for goods, to maintain stable inflation. The factsshow that the prices of commodities in the past six months were mainlydriven by supply and demand.
In the remaining months of thisyear, credit growth will continue to increase along with expandedownership limits and voting rights for foreign investors in listedenterprises, posing a challenge to the State Bank in controlling cashinflow and the exchange rate to curb inflation. Thanh also suggestedstrengthening the fight against goods smuggling and improvingdistribution channels of goods which otherwise may create negativeimpacts on price management policies.-VNA
The CPI, an indicator ofinflation, increased by 0.55 percent in June compared to December 2014,and 1 percent over the same period in 2014, according to the GeneralStatistics Office (GSO).
But the figures marked the lowest JuneCPI since 2001, said Deputy Director of the Academy of Finance’sInstitute of Economics and Finance Nguyen Duc Do. He noted that the rateof inflation in the past year has slowed noticeably and the economy isnow relatively close to an inflation rate of 0 percent - far from thetarget of 5 percent.
Do said concerns about a low rate ofinflation were raised in 2014 when inflation in December 2014 decreasedby 1.84 percent over the same period in 2013, attributed to the sharpdecline of petrol prices. However, in the past six months, inflation hasbeen mainly driven by the higher prices of electricity, the exchangerate and health services, but not petrol prices.
According to theGSO, a 2 percent VND/USD exchange rate adjustment led to a CPI increaseof 0.6 percent, and a 8.47 percent rise in electricity prices led to a0.22 percent increase in the CPI. Do added that the six-month inflationrise was mainly fuelled by costs, but the low inflation pace in the pastyear was due to lower aggregate demand than aggregate supply.
Henoted that since 2008, economic growth has always been lower than thepotential of 6.5 percent, which means the increase in aggregate demandwas lower than that of aggregate supply, pulling down inflation. Thedownward trend of inflation will stop when the economic growth rateincreases to 6.5 percent or above.
Economist Ngo Tri Long saidinflation over the past six months posted a 0.55 percent increasecompared to December 2014, equivalent to nearly a tenth of the year'starget - the lowest figure in the past 14 years. Thus, the year's targetof less than a 5 percent increase in the CPI is achievable.
Longemphasised that low inflation will create positive impacts onsocio-economic development, making investors and enterprises feelsecure, creating favourable conditions for policy makers and managers toput forth and implement measures to remove barriers to production andbusiness activities. But effective control of inflation must create adriving force for GDP growth, he added.
Long said GDP increasedby 6.28 percent in the first six months of this year - a relatively highlevel for recent years - indicated economic recovery. It is expectedthat the GDP growth rate for the entire year will reach 6.2 percent.Despite the high growth rate, a number of economic factors have yet tobe improved, requiring greater efforts from the Government including ahigh trade deficit, and a large number of bankrupt enterprises amongothers.
The Government set a target of reaching an annual GDPgrowth rate of 6.5 percent-7 percent in the 2016-2020 period to avoiddeflation - but attaining this growth is a significant challenge. Dosaid the reduction of interest rates, particularly the lending rate, isone of the prerequisites for achieving this target.
In the2012-2014 period, the State Bank was successful in lowering interestrates, reducing inflation and stabilising the exchange rate and the goldmarket, which was attributed to the flow of cash into the bonds market.Do noted that when the money flows into bonds, the pressure on theexchange rate will decrease, creating good opportunities for loweringinterest rates and issuing government bonds, as well as increasingcredit growth and allowing the easier settlement of non-performingloans. Thus, it is advisable to put money in bonds in the currentcontext, Do said.
Meanwhile, Head of the State Bank of Vietnam'sBanking Strategy Institute, Nguyen Thi Kim Thanh said monetary controlshould be at the top of the list, along with a balance between thesupply and demand for goods, to maintain stable inflation. The factsshow that the prices of commodities in the past six months were mainlydriven by supply and demand.
In the remaining months of thisyear, credit growth will continue to increase along with expandedownership limits and voting rights for foreign investors in listedenterprises, posing a challenge to the State Bank in controlling cashinflow and the exchange rate to curb inflation. Thanh also suggestedstrengthening the fight against goods smuggling and improvingdistribution channels of goods which otherwise may create negativeimpacts on price management policies.-VNA
