Nguyen Dai Lai, Deputy Director of the Banking Development Strategy Department under the State Bank of Vietnam, said price increases on the global market is not the primary reason behind the high inflation rate. Increasing prices is a problem faced by every nation, though other countries’ inflation rates are much lower than Vietnam’s.

China’s rate, for example, is just over 6%, while its GDP growth rate is in double digits. Vietnam’s GDP is less than 8.5% but has over twice the inflation.

Prof Kenichi Ohno, Director of the Vietnam Development Forum, also said Vietnam should not blame global prices for domestic problems.

Dr Nguyen Khanh Long, Head of the Market and Price Scientific Research Institute, pointed out that a major cause of the high inflation rate is superfluous foreign currencies, which has forced the central bank to spend a lot of VND to buy dollars and has resulted in rapidly rising prices.

According to Mr Ohno, at least $15bil has been injected into Vietnam in 2007 from sources including tourism services ($4.6bil), FDI ($2.2bil), ODA ($1.8bil), portfolio investments ($2.5bil).

The problem lies in the fact that Vietnam was and is not ready to absorb so much foreign money.

Vietnam is at the point where it wants and can almost handle a lot of foreign capital but still struggles with efficiency and fiscal responsibility, Ohno explained.

Economist Nguyen Thi Hien said that Vietnam has poorly anticipated problems. Earlier this year, the Ministry of Planning and Investment forecast that FDI capital may reach $15bil in 2007. However, ministries and branches did not expect this to result in high inflation.

2008 goals and plans

Dr Le Quoc Ly, Director of the Finance Department under the Ministry of Planning and Investment (MPI) said that the ministry has forecast a GDP growth rate of 9% and CPI increase of 7.5-8% next year.

Many are asking whether 2008’s inflation rate will be as high as 2007, if foreign capital keeps entering Vietnam.

Mr Ly believes the Government will have more success in 2008 by effectively controlling price increases, tightening monetary policies and controling credit.

Meanwhile, Nguyen Duc Thang, Deputy Director of the Trade, Services and Price Department under GSO, said CPI may increase by 8.2-8.5% in 2008 over 2007. The same factors to blame for this year’s high are expected to play just as much of a role next year.

Experts all agree that price increases will be very high in January and February 2008, when the demand for food and services increase for the Tet holiday season.

Source: VietnamNet