As anticipated, Vietnam’s
inflation rate in 2010 reaches two-digit level at 11.75 percent. Vo Tri Thanh,
Deputy Director of the Central Institute for Economic Management (CIEM), while pointing
out the negative impacts of the high inflation on the national economy,
emphasized that Vietnam should focus on curbing inflation in 2011, and that the
task should be seen as the priority right from the first quarter.

The inflation rate in
2010 is very high at 11.75 percent. So, the year 2011 will begin with a high
start?

As
a rule of thumb, the inflation rate in January is always high, because this is
the time just before traditional Tet, and the demand for production and
consumption increases sharply. The situation will be eased gradually in
February, or after Tet.

However,
the first quarter of 2011 will be set in quite different conditions. The price
increases of some essential goods have been scheduled for post-Tet period.
Therefore, it would be not so easy to predict the inflation rate for the first
quarter of 2011.

What are your
viewpoints about the economic policy for the first quarter of 2011?

My
viewpoint is that right from the first quarter of 2011, the Government needs to
tight policies in order to obtain the most important goal for now – curbing
inflation.

Some
foreign institutions have forecast that Vietnam’s inflation rate in 2011
would be 7-8 percent, if the GDP growth rate would be 7.5 percent. This shows
that it will be very difficult to restrain the inflation rate at below seven
percent for 2011, if we still strive for high economic growth rate. Especially,
the forecasts show that if Vietnam
is not patient in curbing inflation, the macroeconomic uncertainties in 2011
would be even higher than in 2010.

To
date, I still cannot see a clear goal in the monetary policy management for
2011. My viewpoint is that if we insist on maintaining macroeconomic stability,
the credit growth rate in 2011 should not be higher than that in 2010, at about
22-23 percent. I mean that the monetary policies need to be tightened more than
in 2010. With a more flexible management, the national economy will be
gradually stabilized and this will help businesses avoid shocks.

How high should the
inflation rate in 2011 be?

I
have to emphasize that the Government should be determined to curb inflation.
Even the seven percent inflation rate would be too high, which will lead to the
difficulties in macroeconomic management. Especially, this will make the policies
on interest rates and exchange rates consistent. The high inflation will also
lead to the decreases in the cash flow to the production sector, while this
will encourage short term speculation.

Of
course, we should not dream of setting the inflation rate at low levels of
three or four percent like in developed economies, because the sharp reduction
of the inflation rate from 12 percent to 3-4 percent would cause shocks.

I
personally think that we should set the target of six percent in inflation rate
in 2011.

The
task of curbing inflation should be realized at a reasonable pace with the
combination of both monetary and fiscal policies

If
so, the economic growth rate may decrease, and businesses may meet
difficulties. However, in a transparent macroeconomic environment, businesses
will be able to adjust and restructure their business with a long term vision

Source: Dau tu