Vietnam to balance inflation control and growth
Prime minister Nguyen Tan Dung has said for the rest of the year, Vietnam would continue to tighten monetary policy while allowing room for growth.
At the regular cabinet meeting held in Hanoi from August 30 to September 1, PM Dung emphasized the need to pursue a tightened monetary policy as well as policies to support small- and medium-sized enterprises and rural and agricultural areas.
He requested a focus on controlling prices of essential commodities to ensure the balance of supply and demand and prevent price hikes of food, foodstuff and petrol.
At the same time, he said Vietnam must also continue to work to remove difficulties in production and concentrate investment into urgent projects, especially power generation.
He proposed the Ministry of Planning and Investment seek cabinet members' opinions before completing reports on the implementation of the socio-economic development plan in 2011, orientations for 2012 and main tasks of the five-year 2011-2015 socio-economic development plan.
On orientations for 2012, PM Dung proposed closely following the set targets, including a GDP growth of around 6.5 percent, inflation below 10 percent, a trade deficit of less than 13 percent, a reduction in the poverty rate by 2 percent and job generation for more than 1.6 million workers.
Ministries and localities should carry out solutions together, particularly in monetary and financial regulations, investment in agriculture and economic restructuring, he said.
He also asked ministries not to adjust the overall targets of the 2011-2015 plan, saying that ministries and branches needed to review and effectively combine national target programmes to avoid overlap.
At the meeting, cabinet members said that because of drastic and timely efforts to control inflation, stabilise the macro-economy and ensure social welfare, the country's socio-economic situation in August had been stabilised.
For instance, inflation had been kept at less than 1 percent, the lowest figure since the start of the year and export revenues had increased three-fold compared to the initial target.
In the first eight months of the year, the country posted an export turnover of $60.8 billion, a year-on-year rise of 33.7 percent, plus an industrial production value increase of 7.3 percent, said the cabinet members, adding that the country attracted 3.96 million tourists in the reviewed period.
Implementing the government's Resolution 11, ministries, branches and localities also cut VND9.4 trillion from budget capital and government bonds, while groups and corporations suspended and slowed the pace of 907 projects totalling more than VND39.2 trillion.
The resolution has controlled the gold and foreign currency market and reduced monthly inflation rate to below 1 percent.
However, they said that epidemics and disasters have caused loss of life and property as well as hindrances to agricultural production, which pushed up input prices in agricultural production, in addition to high interest rates and difficulties in credit access.
Cabinet members proposed to continue strict implementation of the government's resolution, focusing on restructuring public investment towards sustainable development, and gathering resources to promote agricultural production, breeding and aquaculture under large-scale production models, to ensure food security and increase farm products exports.
The cabinet reached consensus the need to prioritise macroeconomic stability, increase national economic competitiveness and maintain socio-political stability in order to lay a foundation for Vietnam to become a modernity-oriented industrialised nation by 2020.
To effectively carry out the targets, deputy prime minister Nguyen Xuan Phuc proposed the government soon stabilise the organisation, especially the assignment of functions and tasks of each ministry for smooth, effective and transparent operations.
He asked ministries, branches and localities to speed up administrative reform, fight corruption, and minimise the mechanism of "giving" and "asking", especially in budget allocation and major construction investment.
He also proposed the government pay more attention to agriculture, particularly the effective implementation of a national target programme on new rural development.
At the meeting, cabinet members discussed the country's land inventory results of the 2005-2010 period, land use plan until 2020 and the 2011-2015 land use plan and the 13th cabinet's action programme.
They also discussed several draft laws on judicial assessment and handling of administrative and advertisement violations, the prevention and control of tobacco impacts, and water resources.
Tuoi tre - September 5, 2011
Inflation is cutting into Vietnam volumes, Nielsen says
Inflation is cutting into sales volumes in Vietnam and has hurt consumer confidence, said Darin Williams, the managing director of Nielsen Co. (Vietnam) Ltd, speaking at a meeting in HCM City.
Vietnam's inflation rate reached 23.02 percent in August, the fastest in 33 months and the 12th straight increase in the figure.
Higher costs for wages, imported raw materials, fuel and electricity, and weaker real consumer spending have led to a deterioration in corporate profits, Credit Suisse Group AG said on Monday.
Most Vietnamese industries have slowed down and manufacturers face "a very difficult situation," with some companies in the consumer-products industry facing "very, very tight" cash flow, Williams told a business group in the country's largest city on Tuesday. Base-goods industries that have been hit hard in particular include beverages, cooking oil and instant noodles, he said.
Higher prices for raw materials mean that if some companies "didn't raise their prices, they'd be out of business fairly soon," Williams said. "You're seeing prices moving through the economy and you're seeing the volume growth greatly impacted," he said, with the impact being felt among both Vietnamese and foreign companies.
Some industries in Vietnam have proved more resilient, such as healthcare and family products, Williams said.
Impact on labourers
"It's certainly not across the board," Williams said. "There are certain pockets that are faring better than others and certain demographics that are going to fare better than others," he said, with upscale buyers hurt less than labourers.
Vietnamese companies are highly dependent on imported capital goods and raw materials, the costs of which have been driven up by dong devaluations, Credit Suisse said on Monday in a research note.
"There is evidence to support that high inflation and macro uncertainty are starting to take their toll on consumer spending," wrote Karim Salamatian, a Bangkok-based analyst at Credit Suisse. "Real retail sales growth has been negative for three consecutive months."
HSBC Holdings Plc, which cut its Vietnam growth forecast for 2011 to 5.9 percent from 6.1 percent on Tuesday, said Vietnamese inflation will "ease only very gradually."
"The fight against rising inflation is not done yet," wrote Trinh Nguyen, a Hong Kong-based economist at HSBC, in a note Tuesday. "The government faces a tough decision between aggressively fighting stubborn inflation and guarding against a weaker global economic backdrop."
Bloomberg - September 5, 2011