Low CPI an opportunity for 2015

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What is your assessment of the CPI last year and its impact on the economy?

CPI, especially in the later parts of last year, fell well below economists’ predictions.

I think low CPI growth in 2014 was due to two factors. First was a bumper crop, leading to sharp decline in food and foodstuff prices, which contribute up to 40 per cent of principle indexes. Second was the sliding petroleum price, particularly a recent 10 per cent nosedive, which led to a very low December CPI index.

However, if seasonal factors (petroleum and food prices) and the core inflation index are excluded, CPI still grew by 3-4 per cent. This means that there are still factors fuelling CPI growth.

While the National Assembly decided that 5 per cent growth of CPI in 2015 was reasonable as seasonal factors must be taken into account, where we stand now is not a cause for concern. This is a good opportunity for Vietnam to bolster economic stability and growth for the coming year.

Vietnam’s CPI shrunk 0.24 per cent in December. What are your expectations for the first two months of 2015, with the approach of Tet?

CPI in the first two months of 2015 may grow, but not much. That is because food and petroleum prices are still in a downturn.

Secondly, prices are unlikely to increase given current low demand. Therefore, in the coming time we need to mind that CPI may continue to fall, particularly in the post-Tet period.

Generally speaking, Vietnam’s economic situation is a bit strange, but this is not a cause for concern.

Will the CPI situation lead to deflation in the coming time?

I don’t think so. Economic growth in 2014 was strong and the inflation rate, excluding seasonal factors, was still higher than regional countries that saw CPI inch up by only 1-2 per cent. Therefore, we should acknowledge that getting the inflation rate from very high down to its current low level gives Vietnam a rare opportunity to pursue a more stable economy and boost growth.

To succeed with restructuring and continue with our growth pattern, ensuring macro-economic stability remains a prime factor. Hence, once again I want to note that we need to make the most of every opportunity.