Inflation to increase sharply towards the year end

Inflation to increase sharply towards the year end

The national economy has been growing well and expected to prosper in 2013. However, this economic growth may lead to the high inflation by the end of the year, according to the National Finance Supervision Council.

The consumer price index CPI increased slightly in August by 0.63 percent after the two consecutive months of minus decreases. The National Finance Supervision Council, in a report to the government, has warned that this would be a tendency in the fourth quarter of the year.

In principle, CPI increases in the last months of the year, when businesses gear up for the year end production season, while the goods purchasing power increases in the months before Tet. The total demand would increase as the result of the fiscal and monetary policies, thus triggering the inflation.

Meanwhile, the increases of the prices of some essential products would activate as the “push cost” factors, leading to the CPI increase. The petroleum price increases, for example, would lead to the price increases of all kinds of goods and services.

The finance supervision council has estimated that if the average inflation rate in the four last months of the year exceeds one percent, the inflation rate would be high at two-digit level, which would have negative impacts on the macroeconomic stability in 2013. Especially, the problem may become serious when it occurs in January and February 2013, the price increase season.

Therefore, the government needs to maintain the CPI increases at 0.5-0.8 percent a month in the last four months of the year. If so, the inflation rate of the whole year could be curbed at six percent.

The council has emphad that if the inflation cannot be controlled, this would cause the “inflation expectation effect.” Especially, people can foresee the factors that support the price increases in the first half of 2013, such as the planned electricity and water price increases, the basic wage adjustments. The world’s oil and petrol prices may also increase due to the uncertainties in some areas of the world, which would lead to the petroleum price increases in Vietnam.

In conclusion, the economists believe that the targeted inflation rate limitation should be set at six percent in 2013.

Vietnam to see a more prosperous growth in 2013

Though giving warnings about the possible high inflation rate, the finance supervision council keeps optimistic about the economic growth in the next year.

The statistics show the stable improvement in the economic growth in the last eight months with the growth rate increasing quarterly. Especially, the third quarter witnessed a robust growth, which gives a momentum for the stronger development in the time to come.

According to the Ministry of Planning and Investment, the GDP growth rate was four percent in the first quarter, 4.66 percent in the second and 5.5 percent in the third.

The recovery has been attributed to the improvement in the production. The inventory index remains relatively high, but reports all have shown the rapid decreases since March.

Meanwhile, the dong/dollar exchange rate remains stabilized, while the bank loan interest rates have decreased sharply, making it easier for businesses to access official credit sources. The 1.4 percent credit growth rate has been reported for August, after seven consecutive months of minus growth rate.

All these factors can support the economic recovery, giving more reasons to the finance supervision council to predict that the GDP growth rate may reach 5.3-5.6 percent this year.

vietnamnet