Single-Digit Inflation Hard To Achieve: Trade Ministry

The single-digit inflation goal for this year is a real challenge but the Government is still trying to translate it into reality, said Deputy Minister of Industry and Trade Hoang Quoc Vuong.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 same-period level compared to previous years.

Inflation hit 18.58% last year and 2.38% 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,” he said.

Vuong furthered that budget deficit would be within the target that is 4.8% of the country’s gross domestic product this year.

However, Vuong said it was a difficult task to rein in inflation below 10% this year as the Government was under pressure to allow for adjustments of prices of so 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 hikes in the coming time.

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

“How much power tariffs are revised up 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 connection with double-digit inflation, negative real interest rates and a sizeable trade deficit despite improvements in these fields.

“We have long been of the view that Vietnam dong still faces downside risks and have been calling for further depreciation of U.S. dollar-Vietnam dong to VND21,500 by the end of 2012. 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 2-3% depreciation this year,” the report said.

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% year-on-year to exceed US$96 billion and imports near US$106 billion, leaving a trade deficit of US$10 billion, which was lower than the US$12.6 billion in 2010.

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