Experts have been discussing the pros and cons of Vietnam’s tightened monetary policy. Some say it’s necessary to fight inflation while others argue it may harm economic growth.
The tightening has proved effective so far, as the inflation rate has gone down and bank loans have been reduced.
The government is also determined to cut public spending.
According to some experts, however, the tightened monetary policy is causing a severe capital shortage.
If the tightening continues, many businesses may be bankrupted, workers may lose their jobs, and the economy may not reach the targeted growth rate of 7 percent at the end of this year.
Nguyen Van Ngai, dean of Economics at the Ho Chi Minh City University of Agriculture and Forestry, said if monetary policy isn’t eased it could have negative impacts on the future economy.
In the short term it is reining in inflation but in the long run it would reduce economic growth, he said.
Ngai said inflation in Vietnam wasn’t caused just by an increased supply of currency, but also by spiraling prices of gasoline, fertilizer and food.
To curb inflation and ensure economic growth, the government should focus on policies to help stimulate production and create more goods and services, he said.
Other experts and economists think that anti-inflation measures must be prioritized, including an even tighter monetary policy.
Although the fight against inflation may hurt some businesses, the greater good of the economy always ranked first, they argued.
A former official of the Ministry of Trade who wished to be unnamed said to lower interest rates now would be losing sight of the goal to reduce the amount of money in circulation.
“If the banks lower their interest rates because they can cut operation expenses, then it is good and should be encouraged,” the official said.
“But it’s not the right time to reduce the basic interest rate.”
Tran Dinh Thien, deputy head of the Vietnam Economics Institute, said factors causing inflation such as natural disasters, disease, and the high cost of petrol, food and production materials still exists.
“Don’t be content with short-term positive results. Although inflation has slowed, the inflation rate is still high,” Thien said.
The General Statistics Office of Vietnam has predicted three possible scenarios for the inflation rate in the second half of this year – month-on-month increase rates of 1 percent, 1.2 percent or 1.5 percent.
No matter which, the year-end inflation rate would be very high – 25 percent, 27.5 percent or 30 percent respectively, the office said.
Le Trong Nhi, a finance and banking expert, said it was too soon to evaluate the economy and thus monetary policy shouldn’t be eased now.
Other experts shared his view, adding that Vietnam could loosen its monetary policy only when inflation was under control, the beginning of 2009 at the earliest.
Source: TBKTSG |
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