Local economy overcomes most difficult stage: Deputy PM

Local economy overcomes most difficult stage: Deputy PM

 The national economy has passed the most difficult stage in its recovery and should grow well again, said Deputy Prime Minister Nguyen Xuan Phuc at Friday’s Q&A session of the National Assembly

Specifically, given that the Q1/2012 GDP growth rate was just 4 percent due to the rising number of business dissolutions, the growth rate will be improved in Q2/2012.

In the first half of the year, economic growth reached about 4.31 percent.

In the first five months of 2012, though the number of dissolved firms surged to 21,800, up 9.5 percent over the same period in 2011, official statistics showed that the number of shutdown firms in May fell 10 percent compared with the average rate in January-April.

In other good news, the number of newly registered businesses is also on the rise.

The index of inventories decreased from 34.9 percent in March to 32.1 percent in April and 29.4 percent in May.

Regarding the question over whether the VND29 trillion support package including tax extensions, tax breaks for businesses, and interest rate reductions, as well as the pumping of VND21 trillion a month in H2/2012 will fuel inflation, the Deputy Prime Minister said they are already in the government’s plan, and are not unexpected moves.

Therefore, once these new policies are incorporated into current monetary and fiscal policies, inflation will not return.

"The government has set a target for no return of high inflation," said Phuc.

June’s CPI likely to fall

Vietnam’s consumer price index (CPI) in June is forecast to fall from the previous month, the first drop after 40 months of continually rising, according to newswire NDHMoney.

The CPI fall reflects concerns that the economy is entering a state of deflation, according to initial important evidence.

If the forecast is close to the reality, in comparison with late last year, CPI in June would rise only about 2.3 percent, down 0.5 percent month on month.

Meanwhile, if compared to the same period last year, June’s CPI would rise by 6.7 percent, from the rise of 8.34 percent a month earlier.

The downward trend of prices in the world market, together with the price management policies of some important local material commodities, have strongly affected the relaxation of CPI in many groups of essential commodities and services.

The most notable point in June’s CPI is the stable downward tendency of food and foodstuff prices, while prices of oil and gas have consistently fallen sharply recently.

With solutions to support enterprises and the market, the target of keeping inflation below 10 percent should be achieved, and it may even be lower, at 7-8 percent, said a recent report the Ministry of Planning and Investment sent to the NA.

But the report still reaffirmed that the economic growth target of 6 - 6.5 percent will be difficult to achieve, and it is forecast at only 5.5 – 6 percent for the whole year.

The ministry also mentioned the need to maintain persistent targets set for 2012, including actively controlling inflation at 8 percent, stabilizing macroeconomic issues, ensuring economic growth at a reasonable level of about 6 percent, and ensuring the targets of social security under the plan proposed earlier this year.

“From now until the end of the year, if we do not achieve the growth target of 6 percent, about 5.5 percent is still reasonable, and CPI will only be about 8 percent,” said economist Tran Du Lich, an NA delegate, at a recent assembly meeting.

“Of course, 8 percent inflation is high, and affecting the public livelihood negatively,” he added.

Mai Xuan Hung, Vice Chair of the National Assembly’s Economic Committee, said the ideal figures for this year are inflation at 7 percent, and growth at 6 -6.5 percent.

“Abnormally low CPI”

However, VEPR, an economic research center under the Hanoi National University, has affirmed in its report about the economic prospects in 2012 that the inflation rate would be “abnormally low” this year.

In the most pessimistic scenario drawn up by the center’s economists, the inflation rate would be only at 6.2 percent.

“Maybe our method used to calculate the inflation rate is different from that used by other institutions. We have every reason to affirm that the inflation rate in 2012 will be very low, and this will not be a good sign,” said Nguyen Duc Thanh, VEPR’s director.

Thanh and his associates conducted a survey with the available information to estimate the possible performance of inflation.

They believe that a new period of very low inflation rates is coming. According to their forecast the inflation rate will actually be negative in the upcoming months

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