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CPI continues decreasing, Vietnam at 2nd-degree alert (27/7)
27/07/2012 - 15 Lượt xem
Vietnam’s economy at 2nd-degree alert
Bui Kien Thanh, an economist, said the “national economy ship” is now in the rainstorm season. The consumer price index (CPI) decline in June could be seen as the 1st-degree alert, while the continued CPI decrease in July should be seen as the 2nd-degree alert.
This means that if the inflation rate is a minus figure in August, which means that the CPI decreases for three consecutive months, the hydrology of the national economy would be in danger, because the 3rd-degree alert, the highest level, would be given.
By that time, the 3rd-degree flood would inundate all the achievements Vietnam gained before, including the successful inflation congestion, sustainable development maintenance, while the economic recession would break out.
The big problems of the national economy have not been settled. The market demand gets exhausted, businesses go bankrupted, the production comes to a standstill, workers become unemployed.
According to Thanh, other governments would take necessary measures to fight against recession and against crisis, not only simply to stop deflation, if they see the similar signals like Vietnam.
Ngo Tri Long from the Market and Price Research Institute said it would be not worrying, if the CPI decreased, but the GDP growth rate kept rising. However, Long believes that the situation has become really worrying, since both the CPI and GDP growth rate decreased in the first six months of the year.
“Deflation could be even more dangerous than high inflation. Deflation would certainly lead to the economic crisis. It’s undeniable that the national economy is facing the double decline,” Long said.
Has the decline bottomed out?
Being Chair of the Hanoi Supermarkets’ Association, Vu Vinh Phu said the information about the CPI decrease in July did not surprise him, because he saw the sharp falls of the sales of the supermarkets in Hanoi.
The CPI decrease, according to Phu, shows the exhausting purchasing power. What the government needs to do now is to help businesses clear their big stocks, get money to pay workers and borrow loans to continue production.
He also said that the 29 trillion dong bailout package initiated by the Ministry of Finance would not help settle the existing main problems. “The tax exemption proves to be meaningless, because businesses do not make profits to pay the corporate income tax or pay land tax.
Phu has proposed to slash VAT, corporate income tax, bank loan interest rates and control the prices of the products which are the input materials for production, such as electricity and petroleum.
Thanh has agreed that the bailout package would be able to rescue some businesses, while tens of thousands of businesses, which are at the point of death, would not be revived. A big amount of enterprises has been excluded from the “rescue campaign,” therefore; the bailout package would not help recover the national economy.
Thanh has also stressed that the most important thing businesses need at this moment is the capital cheap enough to help them resume production. The State Bank of Vietnam has instructed commercial banks to ease the lending interest rates to 15 percent. However, the call by the central bank would not help much.
The lending interest rate should be stabilized at 6-7 percent for at least 3-5 years. If the State lends at 2-3 percent to commercial banks, the banks would be able to provide loans at 6-7 percent only, affordable to businesses.
Source: Vietnamnet.
Bui Kien Thanh, an economist, said the “national economy ship” is now in the rainstorm season. The consumer price index (CPI) decline in June could be seen as the 1st-degree alert, while the continued CPI decrease in July should be seen as the 2nd-degree alert.
This means that if the inflation rate is a minus figure in August, which means that the CPI decreases for three consecutive months, the hydrology of the national economy would be in danger, because the 3rd-degree alert, the highest level, would be given.
By that time, the 3rd-degree flood would inundate all the achievements Vietnam gained before, including the successful inflation congestion, sustainable development maintenance, while the economic recession would break out.
The big problems of the national economy have not been settled. The market demand gets exhausted, businesses go bankrupted, the production comes to a standstill, workers become unemployed.
According to Thanh, other governments would take necessary measures to fight against recession and against crisis, not only simply to stop deflation, if they see the similar signals like Vietnam.
Ngo Tri Long from the Market and Price Research Institute said it would be not worrying, if the CPI decreased, but the GDP growth rate kept rising. However, Long believes that the situation has become really worrying, since both the CPI and GDP growth rate decreased in the first six months of the year.
“Deflation could be even more dangerous than high inflation. Deflation would certainly lead to the economic crisis. It’s undeniable that the national economy is facing the double decline,” Long said.
Has the decline bottomed out?
Being Chair of the Hanoi Supermarkets’ Association, Vu Vinh Phu said the information about the CPI decrease in July did not surprise him, because he saw the sharp falls of the sales of the supermarkets in Hanoi.
The CPI decrease, according to Phu, shows the exhausting purchasing power. What the government needs to do now is to help businesses clear their big stocks, get money to pay workers and borrow loans to continue production.
He also said that the 29 trillion dong bailout package initiated by the Ministry of Finance would not help settle the existing main problems. “The tax exemption proves to be meaningless, because businesses do not make profits to pay the corporate income tax or pay land tax.
Phu has proposed to slash VAT, corporate income tax, bank loan interest rates and control the prices of the products which are the input materials for production, such as electricity and petroleum.
Thanh has agreed that the bailout package would be able to rescue some businesses, while tens of thousands of businesses, which are at the point of death, would not be revived. A big amount of enterprises has been excluded from the “rescue campaign,” therefore; the bailout package would not help recover the national economy.
Thanh has also stressed that the most important thing businesses need at this moment is the capital cheap enough to help them resume production. The State Bank of Vietnam has instructed commercial banks to ease the lending interest rates to 15 percent. However, the call by the central bank would not help much.
The lending interest rate should be stabilized at 6-7 percent for at least 3-5 years. If the State lends at 2-3 percent to commercial banks, the banks would be able to provide loans at 6-7 percent only, affordable to businesses.
Source: Vietnamnet.
