Inflation is expected to dip lower in 2015, which could give the central bank room to cut back loan interest rates, according to the Ministry of Planning and Investment.
Initially, the inflation rate was projected to be 4 percent in 2015, as revealed in a meeting on December 17, Vneconomy reported.
The Ministry of Planning and Investment said any price adjustments, whether in case of products or services in domains such as healthcare, education, power and petrol, must be carefully considered to prevent any significant impact. Similarly, any decision to adjust the price of oil should be critically deliberated upon, as well.
This followed the Electricity of Vietnam's proposal to raise power tariffs by an average of 9.5 percent, beginning this month.
According to the ministry, the input-output analysis (I/O) revealed that a 9.5 percent increase in power price would raise the production cost by 0.55 percent. It would also cause the end-consumption of households to decline by 0.58 percent and the gross domestic product (GDP) growth rate to decrease by 0.45 percent.
In addition, cutting the loan interest rate by one percent would increase the GDP growth rate by 0.45 percent and cause the inflation rate to decline by 0.76 percent.
An expert said that the loan interest rates of Vietnam remain high, putting immense pressure on businesses. If loan interest rates are not lowered, then it would be difficult for the economy to attain stable growth in medium and long term.
The Government has prioritised macroeconomic stability and inflation reduction in the past.
In November, Prime Minister Nguyen Tan Dung had said Vietnam's inflation rate this year was likely to remain below 3 percent, its lowest level in decades.-VNA
