No time for backward steps Macro

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Nguyen Duc Thanh, director of the Vietnam Centre for Economic and Policy Research (VEPR) under the Hanoi-based University of Economics and Business, said inflation would possibly climb to 18 per cent this year if the government loosened its grip on fiscal and monetary policy.

“We have suggested that the government should be persistent with its tightening policies until late this year and should stand firm in the face of public and business pressure to be successful with its anti-inflation policy,” Thanh said.

“A strict implementation of the government’s Resolution 11 will keep inflation at 15 per cent this year,” added Thanh.

Resolution 11 introduced on February 24, aims to contend with an unstable macroeconomic situation where Vietnam was being negatively affected by global economic and political uncertainties.

The resolution provides measures to rein in inflation, stabilise the macroeconomy and ensure social stability.

Included in the resolution are moves to tighten monetary and fiscal policies, cut public investment and reduce budget and trade deficit. 

State-run economic groups and enterprises are a particular target of the resolution. “Vietnam’s current economic development model focuses on extensive investment with state-run economic groups [acting as] the steering role in the economy. These groups are, however, operating ineffectively, resulting in a big waste of national resources,” Thanh said.

According to the Ministry of Planning and Investment (MPI), the public sector has slashed some VND97 trillion ($466 million) from the investment projected for this year. State-run economic groups and corporations alone have cut investment in 907 projects worth VND39.2 trillion ($188 million).

But the MPI reported that many localities and enterprises had not yet been ruthless enough.

Deputy director of Ho Chi Minh City’s Industry and Trade Department Ton Cong Tri stressed that now was not the time to report economic achievements.

“The majority of measures we have taken so far to deal with market problems are administrative instructions. We need more market solutions rather than those instructions and statistics,” Tri said.  Inflation in April was up 9.64 per cent against December last year, far higher than the 7 per cent level set for 2011.