Vietnam prioritizes tackling inflation

25 Feb, 2011
Source: Earth Time

Hanoi - The Vietnamese government has approved a plan to tackle inflation, authorities said Friday.

The government had aimed to hold inflation at 7 per cent in 2011, but achieving that would be difficult as accumulative inflation for the first two months was at 3.87 per cent, economists said.

"Controlling inflation is the first priority of the government," said Deputy Prime Minister Nguyen Sinh Hung. "The austerity measures are not aimed at wages or government policy beneficiaries but to pause new equipment acquisitions, reduce energy spending and cut non-essential expenditures."

Vietnam faces soaring inflation, a growing deficit, a weak currency, falling foreign exchange reserves and a plummeting stock market. The targets approved Thursday included lowering credit supply growth to below 20 per cent and narrowing the trade deficit to below 16 per cent of total exports.

Government investment was to be cut to 38-39 per cent of the gross domestic product (GDP) from 41 per cent, the budget deficit reduced to 5 per cent of GDP and a "cautious and tight" monetary policy imposed.

Measures to achieve those targets include boosting agricultural production to reduce food imports, plans to reduce import taxes on raw materials to boost industrial production and a hike in electricity prices.

Ministries and provinces were instructed to cut public spending by 10 per cent. The central bank was to slow lending to non-productive sectors such as property and stock trading and restrict gold trading "The government's plan was viewed as major shift in its policy stance from emphasizing growth towards stabilizing the economy," said senior economist Le Dang Doanh.

The government wanted contain inflation at 8 per cent last year, but it hit 11.8 per cent.