Learning to look on the bright side

Maritime Bank’s Economic Research Centre director Trinh Quang Anh said open-market operations were the most powerful management tool to boss Vietnam’s monetary market.

Anh, however, said this tool was almost paralysed in 2012, as they were only revived in late 2012 after the State Bank cut a series of management rates, cultivating hopes for further sliding interest rates and better credit growth in 2013.

Ministry of Planning and Investment Policy and Development Institute director Dao Van Hung said high inflation was the toughest challenge to ease rates and fuel credit growth.

Hung argued the root of inflation was still visible, including cost-push inflation factors, particularly the process of setting market prices for a number of commodities whose prices were formerly set and partly subsidised by the state.

Hence, it was important to remain consistent with anti-inflation targets to avert inflation from credit, fiscal and money supply channels to bolster monetary policies’ efficiency in 2013.

“The inflation target of below 6 per cent would be rather low as fiscal and monetary policies shall be further tightened to act in concert with this. Otherwise, the government shall have to contain imports or loosen the price revision pace of products whose prices are under state management,” said Hung.

Hung argued the overall efficiency would be more stable if the inflation target in 2013 was 8 per cent with 17 per cent credit expansion.

Economic expert Pham Tat Thang assumed quickly decelerating inflation in 2012 would threaten economic growth, but it also entailed an opportunity to ease lending rates to 9-10 per cent, per year.

“If this goal is achieved, it could revive struggling businesses,” said Thang.

Anh said current economic restructuring process must be accelerated to bring monetary and fiscal efficiency.

Central Institute for Economic Management deputy director Dr. Vo Tri Thanh said unlike the previous year, fresh points were seen in fiscal and monetary policies coordination in 2013.

“Usually in the previous years the government introduced new policies in the first quarter which were enforced from the year’s middle. This year, from late 2012 the government gave out policy messages and prepared a fiscal policy package which may come into force from early year,” Thanh said.

Monetary policies harmoniously combining with fiscal policies was one of the prime minister’s New Year messages in early 2013. Accordingly, in early part of 2013 fiscal policies play a decisive role in creating aggregate demand of the economy since credit flow still get stuck due to bad debts.