Battle plans to survive inflation

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Reality shows that around 10 per cent of businesses have shut up shop in 2011 due to a hostile business climate.

“Numerous provincial small- and medium-sized firms could not survive 2011 escalating input costs and high lending rates. If the situation holds up, how could they get by?” said Phu Tho Provincial People’s Committee chairman Hoang Dan Mac.

Hanoi Municipal People’s Committee chairman Nguyen The Thao said there needed to be a concrete trajectory on lending rate reductions since the current high rates hurting firms would cast detrimental impacts on Vietnam’s economic growth, employment and social security.

The government said its top targets in 2012 would remain reigning in inflation and ensuring macroeconomic stability. The prime minister also put forward the target of keeping inflation at a single digit level of 9 per cent, while State Bank  governor Nguyen Van Binh confirmed its goal of bringing the deposit rates down to 10 per cent per year in 2012, paving the way for gradually easing the lending rates.

Reality shows that the consumer price index in December 2012 just hiked 0.53 per cent against November, a fairly low level compared to it was in the past five years. Accordingly, except 2008 which witnessed an economic slump the December CPI growth rates from 2005 until present were set at 0.5, 2.91, 1.38 and 1.98 per cent, respectively.

December 2011’s 0.53 per cent CPI growth was regarded as a positive figure, reflecting visible outcomes of Resolution 11/NQ-CP to bridle inflation.

However, both the prime minister and State Bank chief admitted high inflation pressures could still hover over the economy in the upcoming months.

A senior expert in the finance and banking sector assumed current ceiling mobilising rate of 14 per cent, per year could hardly be soothed if the CPI growth in early months of 2012 exceeded 1 per cent per month.

A recent survey showed that scores of firms still suffered a high borrowing cost of over 18 per cent per year. Hence, firms’ biggest headaches in the coming year are predicted to be difficulties in accessing loans and dwindling profit figures.