Inflation proves to be stubborn adversary

Manufacturers will continue suffering tight credit lines as monetary tightening remains a priority

The inflation cap for this year has been adjusted to 17 per cent from the 15 per cent  target announced in early June.

Inflation climbed to 13.29 per cent in June against last December, or a 22.6 per cent rise year-on-year, making the previously set 15 per cent goal virtually unrealistic.

“There are many factors that could blow inflation up in the upcoming months. It is not easy to curb it in a short time,” said Do Thuc, general director of the General Statistics Office (GSO), referring to increased prices of global input materials, food and fuel, and natural disasters.

Thuc said even if measures provided in the governmental Resolution 11/NQ-CP on stabilising the macro-economy and curbing inflation were seriously implemented, inflation would be 16 per cent at a minimum.

The government last week reaffirmed to pursue tightened monetary and fiscal policies, including a limitation of annual credit growth at 20 per cent while money supply growth was capped at 16 per cent.

“We have not yet thought about easing monetary policies,” said Nguyen Xuan Phuc, Minister and Chairman of Government Office.

However, director of the GSO’s Price Statistics Department Nguyen Duc Thang said if credit grew 20 per cent, it would blow inflation out of control.

Some international financial institutions have even forecast Vietnam’s inflation could be higher than the adjusted cap of 17 per cent.

In a report released two weeks ago, Barclays Capital expected Vietnam’s inflation would peak at 22-23 per cent by July or August, driven by commodity prices, before heading lower in September on slower credit and money growth and end with a 18 per cent rate for the whole 2011.

Tai Hui, a Singapore-based economist at Standard Chartered Bank, said the consumer basket was a reason for rising inflation rate in Vietnam.