The consumer price index (CPI) increased by 5.2 per cent in the first half of 2005, according to figures from the General Statistics Office. Accordingly, the CPI of food and foodstuff saw the highest increase of 7.7 per cent. The figures for drinks, tobacco, housing and construction materials were put at only 3.1 and three per cent. The CPI of other goods rose by between 1.2 and 2.9 per cent. The gold price saw a 4.4 per cent fall. The exchange rate of US dollar was station. Despite a lower increase in comparison with the same period last year, the CPI of the first half of this year has been equal to 80 per cent of a target of 6.5 per cent set by the National Assembly for this year. Therefore, it will be difficult to stabilise prices in the year-end months.
According to the Ministry of Finance, in the final half of 2005, there will be many favourable factors for the Vietnamese economy to achieve its development target, contributing to the stabilisation of prices. However, there are still many factors which may produce a negative impact on the achievement of a target of a CPI increase of 6.5 per cent. The international economy still has hard-to-forecast developments. Although the global economy is expected to see a lower growth rate than 2004, the demand for fuel and materials, in particular oil and petrol, steel, fertiliser, oil-based products, medicines and rice, remains high. The situation may result in a price increase in the domestic, following two manners. Accordingly, prices of main agricultural exports will rise, leading to an increase in the domestic market and high prices of imports will keep a heavy pressure on prices of locally-made products.
On one side, a growth rate of 8.5 per cent is a high target, which was not achieved in the first half. Therefore, the target for the final half of the year will certainly be higher. To that end, all resources will be mobilised. This will be a great pressure on prices. On the other side, the competitiveness of Vietnamese goods, services, enterprises and the economy remains poor. Unexpected instabilities, including natural disasters and diseases, are the factors which may produce a negative impact on the market price.
To control the CPI, not letting its increase exceed 6.5 per cent, Vietnam should take seven following solutions, according to the Ministry of Finance.
Firstly, ministries and management agencies should co-operate with each other and concentrate on settling production and business difficulties, ensuring a balance between goods and service supply and demand, as well as reproduction to avoid any imbalance between supply and demand, import and export and among regions, and periods of time within a year.
Secondly, financial policies, concretely fiscal policies, should be used in a flexible and timely manner. Measures for the development of corporate finance should be taken, encouraging enterprises to renew their technology and increase productivity, cutting production and circulation costs, thus helping reducing prices of goods. Subsidies and financial support for ineffective State-owned enterprises should be stopped. Flexible financial policies, which do not violate Vietnam ’s international integration commitments, are needed when there is any complicated development of prices of materials and goods. The tax cut roadmap should be implemented synchronously, reducing protection via tariff barriers for goods and services, which are unnecessary to be protected, so as to produce a pressure on local enterprises.
Thirdly, monetary policies should be used to produce an impact on prices. Accordingly, the State Bank of Vietnam continues to take measures to run active and flexible foreign exchange policies in combination with interest policies, suitable with the market economy with the State’s management, not letting any sudden developments, to stabilise the monetary market and macro-economics. It will also provide guidelines for commercial banks to promote their examination on loan provision to increase the quality of credit, reducing bad debts within banking activities.
Fourthly, the Ministry of Trade will co-operate with ministries and management agencies to promote the control and examination of import, export and reservation activities, helping State-owned enterprises, in particular corporations, develop their key position in regulating demand and supply, and stabilising prices of necessities for daily life of the people and production activities. The Ministry of Agriculture and Rural Development will co-operate with the People’s Committee of Mekong delta provinces to have enough information about commodity rice in 2005 and the stock volume of enterprises to co-operate with the Ministry of Trade in managing the export of rice.
Fifthly, production costs should be cut for a reduction of prices, constraining an increase in prices of input factors.
Sixthly, prices should be stabilised on the local market. Departments and relevant agencies, including customs, market management) should reconsider fees and administrative procedures within their authorities to make timely adjustments, overcoming difficulties for production and business enterprises by examining and controlling the factors which determine prices of materials and goods managed by localities.
Seventhly, forecast and analysis of supply and demand should be promoted to take measures to stabilise prices under the Ordinance on Price.
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Mai Anh