The General Statistics Office last week reported that inflation in 2009 hit 6.52 per cent, dispelling concerns about high inflation returning at the end of 2009. Rampaging inflation was the biggest threat to Vietnam’s economic development in 2008, when the rate reached 19.89 per cent, the highest level since 1992.

Many analysts warned that high inflation could return at the end of 2009 and in 2010 as the government implemented monetary and fiscal stimulus measures to counteract the economic slowdown since late 2008.

Speaking at a State Bank conference in Hanoi last week, Prime Minister Nguyen Tan Dung asked the central bank to continue reining in inflation to below double-digits in 2010 through monetary policies.

However, he stressed the policy should be flexibly and effectively implemented to ensure the economic recovery continued. Vietnam is estimated to achieve a 5.2 per cent growth in 2009 despite the global economic recession, becoming one of the globe’s highest growing economies. The government expects the economy will expand 6.5 per cent in 2010, coinciding with the Asian Development Bank’s forecast of 6.5 per cent and HSBC’s 6.8 per cent expectation.

Cao Sy Kiem, a member of the National Advisory Council for Monetary Policies, attributed 2009’s achievement to the government’s eased monetary policies and other stimulus measures. He said the 2009 growth would give momentum for a strong recovery in 2010, adding that the government had enough experience in controlling inflation, which Kiem believed would be kept at a single-digit level.

The State Bank last week announced it would cap credit growth at 25 per cent to help prevent a return of high inflation. However, it said the cap would be managed flexibly to ensure high economic growth. Bui Kien Thanh, general director of International Asset Management Corporation, said the government could restrain inflation without having to tighten monetary policy.

“We should not fully blame high credit growth for inflation. The State Bank should ensure that enterprises can easily access loans rather than limit credit growth,” he said. However, Thanh said the threat of inflation remained if the State Bank could not effectively control money flows into real estate, securities and consumption.

“The State Bank could limit loans for those sectors and consumption, but not for manufacturing and trading sectors,” he said, adding that would make economic growth higher.

Source: VietNamNet/VIR