Vietnam: Keeping inflation below 8pct in 2013

It requires constant efforts in the next 10 years to contain inflation, stabilise macro-economy, and build a firm foundation for growth.

* Inflation rates should be kept at 8 percent: PM
* September inflation causes concern
* Keeping credit growth in harmony with inflation

This was emphasized by the National Assembly in its newly adopted resolution on the 2013 plan for socio-economic development.

A VOV online reporter interviewed Nguyen Viet Ngoan, Chairman of the National Financial Supervisory Commission, on major socio-economic targets.

VOV: One of the most important economic targets for 2013 is GDP growth at 5 percent. Do you think it’s too low?

Mr Ngoan: It is reasonable to set GDP growth at 5.5 percent in 2013. Although the country has huge potential growth, it needs to judge carefully from what might happen in 2013 for depending on the supply and demand capacities of the national economy and many other factors.

VOV: 2013 is a pivotal year of the five-year development plan. Will such growth rate bring more pressure to bear on the following years?

Mr Ngoan: There is no doubt that Vietnam has certain difficulties achieving its five-year economic growth targets. Even it fails we have to accept changes in the context of economic growth when internal problems cannot be resolved overnight. However, we must consistently strive to stabilise the macro-economy and create a firm foundation for growth so that the country will move forward ever more steadily in the next period.

VOV: In fact, if GDP growth is too low, it might put a damper on employment and send the rate of unemployment rising. Do you think so?

Mr Ngoan: We have to accept this because economic policy often has two sides. If we obtain one target we have to sacrifice another. A higher growth rate will help generate more jobs, but it is also likely to lead to run-away inflation and macroeconomic instability. The bottom line is we need to contain inflation, stabilise macro-economy, and build a firm foundation for growth in the next 10 years.

VOV: Does the country have any chance of keeping the rate of inflation below 8pct?

Mr Ngoan: The NA’s decision to set the inflation rate at 8 percent is in line with reality. I think we can keep inflation even at a lower level and need to do with greater efforts.

VOV: What will be the focus of economic restructuring in 2013?

Mr Ngoan: I think the focus will be on restructuring the banking system because it is the blood vessels of the economy. If the banking system is not improved economic growth won’t be spurred.

VOV: How will the resolution affect the socio-economic situation in 2013?

Mr Ngoan: The resolution has set several key tasks, including revising the Land Law, especially regulations on real estate and land use.

There will be drastic measures to help resolve problems in the real estate and construction sectors, which account for 10 percent of GDP. Over the past two years, construction has shown negative growth. In the future, if Vietnam wants to obtain higher economic growth, the country must promote construction development. Recently, construction has fallen into stagnancy. Cutting down public investment and tightening monetary policy, no doubt, has slowed down construction and real estate process.

VOV: The National Financial Supervisory Commission has proposed issuing project bonds. If it is implemented how will it affect the economy?

Mr Ngoan: This is a step in the right direction. Low GDP growth rates will affect employment as total consumer demand and investment decline. To help businesses clear out their stockpiles there must be compensation one way or another. The Government should pour more capital into key projects by way of loosing fiscal policy, and issuing project bonds.

This is a practical way to keep the construction and real estate sectors purring along.

VOV: Another hot issue is how to deal with bad debts. What you think needs to be done first?

Mr Ngoan: The Government should ask credit organisations to reserve emergency resources for unexpected risks. Vietnam should learn from the experience of other countries and establish a company to deal with bad debts.

Vietnam should try to limit bad debts to under 3 percent in the next two or three years.

Thank you very much.

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