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VIETNAM - Inflation in 2012 will go down, even if the government does nothing   DinarDailyUpdates?bg=330099&fg=FFFFFF&anim=1

VIETNAM - Inflation in 2012 will go down, even if the government does nothing

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Post by lexie Thu Jan 12, 2012 11:57 am

January 12, 2012

Inflation in 2012 will go down, even if the government does nothing

“Sit and wait to see the inflation going down in 2012, even if we do nothing to force the inflation down,” said Deputy Chair of the National Finance Supervision Council Le Xuan Nghia.

Nghia has said that he cannot see any big threats to the national economy in 2012. The Resolution No 11 on curbing inflation would show its clearer effects in 2012. Meanwhile, the goods prices in the world have been going down, and the trade gap is expected to stay at a low level. The dong/dollar exchange rate is believed not to see big fluctuations. All that factors would help curb the inflation rate at reasonable level.

The economists who attend the workshop on the economic prospect in 2012 held by the National Finance Supervision held in Hanoi in January 9, also shared the same view with Nghia.

They said that the national economy starts the 2012 with a stable inflation foundation. The monthly consumer price index (CPI) increase in December 2011 was very low in comparison with the same periods of the previous years. Meanwhile, the dong/dollar exchange rate, which, together with the high inflation, is the biggest worry, has also been stabilized.

Meanwhile, big finance institutions have predicted that the world’s goods prices in 2012 may go down by 10 percent over 2011.

Dr Nguyen Duc Thanh, Director of VEPR, an economics and policy research center, believes that this is the good factor which can help prevent the inflation rate increase so sharply like in 2011.

Regarding the dong/dollar exchange rate, Thanh said that the payment balance surplus of 3 billion dollars in 2011 and the expected continued surplus in 2012 would be the good foundation to stabilize the dong value.

Sharing the same view, Deputy Director of the Central Institute of Economic Management CIEM Vo Tri Thanh quotes the predictions of some international institutions that the dollar price would not exceed the 22,000 dong per dollar threshold, which means that the dong devaluation would not be higher by 4-5 percent than 2011.

According to the National Finance Supervision Council, in the first six months of 2012, the CPI may increase by 3-4 percent only, if the exchange rate fluctuations do not occur.

Meanwhile, the council’s Chair Vu Viet Ngoan has affirmed that the CPI increase of less than 10 percent in the whole year 2012 is feasible.

However, economists have warned that the government still needs to be cautious in the economic management, even though with the low inflation. A lot of proofs have been cited to show that risks still exist in the national economy.

After four years of instability, when the inflation rate was not only very high, but fluctuating heavily, Thanh thinks that these are the signs showing the loss of control over the inflation.

Since 2007, when Vietnam joined the World Trade Organization WTO, Vietnam’s inflation has been increasing and performing unexpectedly with two times approaching to the 20 percent threshold.

“Though we believe that the inflation rate would be just about 10 percent in 2011, we still think that there are latent risks,” Thanh said.

Thien has also pointed out that the national economy has been facing a lot of challenges. The interest rates have been staying high for a long time, while the State Bank still cannot withdraw money from circulation effectively. Meanwhile, the production and business now lack money to continue normal operation.

Regarding the overly high interest rates, Ngoan said that with the expected inflation rate of 9 percent in 2012, the deposit interest rate of 10-11 percent per annum would ensure the real profits for depositors. As such, the lending interest rate may decrease by four percentage points in comparison with the previous year.


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