Gov’t strives to keep inflation below 10 pct

The Government is trying hard to achieve the single-digit inflation target, Deputy Minister of Industry and Trade Hoang Quoc Vuong said.

Speaking to representatives of local and foreign businesses at a business luncheon organized by the European Chamber of Commerce in Vietnam (EuroCham) in HCMC last week, Vuong said the consumer pricing index in the first two months of 2012 was the lowest level compared to the same period in previous years.

Inflation hit 18.58 percent last year and 2.38 percent in the first two months of this year.

“Observing what happened in the first two months compared with the records in many years before and with the measures we are implementing now, we hope that the (inflation) situation can be under control,” Vuong said.

Vuong said the budget deficit would also be within the target: 4.8 percent of the country’s gross domestic product.

But he said it was a difficult task to rein in inflation below 10 percent this year as the Government was under pressure to allow for adjustments of prices of many key items including gas, coal and electricity.

“So, the Government has to carefully and cautiously consider (the price adjustments) so as to keep the inflation rate under control,” Vuong responded to a question from the audience regarding how to balance the inflation target and increasing prices, particularly possible electricity tariff increases.

“I cannot confirm anything at the moment,” Vuong said and stressed that power tariffs would change in accordance with major cost factors, including the exchange rate between the Vietnam dong and the US dollar.


“How much power tariffs are increased should be carefully and cautiously weighed by the Government so that we will achieve the bigger objective of macroeconomic stability,” Vuong said.

In its latest report on Vietnam, HSBC Global Research projected the Vietnamese currency would depreciate to VND21,500 per dollar by the end of this year given concerns about double-digit inflation, negative real interest rates and a sizeable trade deficit despite improvements.

“We have long been of the view that Vietnam dong still faces downside risks and have been calling for further depreciation of US dollar-Vietnam dong to VND21,500 by the end of 2012,” the report said. “This would be largely in line with what the State Bank of Vietnam recently stated was its view for the dong in 2012 - when (SBV) Governor Nguyen Van Binh stated that he saw no more than 2 percent -3 percent depreciation this year.”

The Ministry of Industry and Trade is making efforts to maintain the same trade deficit this year as in 2011.

Last year saw exports increase over 33 percent year-on-year to top US$96 billion and imports near $106 billion, leaving a trade deficit of $10 billion, which was lower than the $12.6 billion in 2010.

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