Inflation a stubborn beast

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The General Statistics Office (GSO) reported the consumer price index (CPI) rose 1.17 per cent in July against June, or 14.61 up against December, 2010 and 22.16 per cent higher than July last year.

“This [latest figure] runs counter to the slowdown trend in May and June and also goes against the low rate [seen] for July in previous years. There is something wrong with the implementation of inflation controlling measures,” said economist Le Dinh An, ex-director at National Centre for Socio-Economic Information and Forecasting.

The GSO blamed short supply for a 3.2 per cent price hike in foodstuffs against June and said these price rises were the main reason for the CPI rebound in July.

“Our management of supply chains is not so good,” said Nguyen Tien Thoa, director the Ministry of Finance’s Department of Price Management.

Although the government announced effective management of supply chains was part of its package of measures to curb galloping inflation, Thoa said this measure had “not yet been paid adequate attention”.

Nguyen Dong Tien, Deputy Governor of the State Bank, said price hikes were putting pressure on the government when it came to anti-inflation measures. He said it was a big challenge to keep inflation at below 17 per cent.

Minister and Government Office  chairman Nguyen Xuan Phuc said tightened monetary policy would continue to be implemented in the next months. This means enterprises go on having to cope with high lending interest rates for loans at commercial banks, hovering around 24-25 per cent.

Meanwhile a survey by Vietnam WVB Financial Intelligence Services and PetroVietnam Finance Investment and Consultancy Company show that business confidence among firms in Vietnam slid 21 points in the second quarter, from 109 to 88 points. This is the biggest drop since late 2008.

High inflation and difficult access to credits because of high lending interest rates were blamed for this dip in business confidence.

Bui Kien Thanh, general director of International Asset Management Corporation, said the government should change the way it implemented monetary policy to lower the lending interest rate. “The State Bank of Vietnam should provide commercial banks with cheap funds rather than to let them mobilise from individuals. By doing that, lending interest rates could come down, resulting in lower inflation,” he said.