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Low inflation keystone for growth

Update: May, 23/2013 - 08:24
Illustrative image.— File Photo

HA NOI (VNS)— Single-digit inflation should be maintained for three coming years to achieve the economic growth target, experts said at a Tuesday conference held by the Academy of Policy and Development.

Nguyen Thac Hoat from the academy said in the economic downturn, the inflation rate in the 2013-15 period should be controlled at about 7-7.5 per cent.

This is to allow gross domestic product (GDP) to grow at an average of 6.5-7 per cent per year as targeted by the National Assembly.

A report at the conference said that economic growth and inflation in Viet Nam were somehow inversely related.

Statistics showed that in 2004-06, inflation was within 7-9.5 per cent and GDP growth at 8-8.5 per cent. However, in 2010-11, when inflation rocketed to double-digits, GDP grew at only 6-6.8 per cent.

Experts said that the country's economic growth relied too much on an increase in investment during 2007-11. Together with the inefficient use of capital, it put pressure on inflation to rise.

Hoat calculated that when inflation exceeded the optimal threshold, an increase by 1 per cent of inflation could lower economic growth by 0.0138 per cent.

Economist Luu Bich Ho forecast economic growth at 5-6 per cent per year. He said that the optimal inflation rate was between 7-8 per cent, but could be lowered to 5-6 per cent when the economy experienced higher growth.

According to academy director Dao Van Hung, declining credit growth from 2011, despite a slight increase in the the past two months (by 1.4 per cent by the end of April) put impacts on the economic growth.

Inflation control required co-ordination and consistency of financial and monetary policies, Hung said. Tighter policies could help prevent inflation in the short term, he stressed, but added that the risk of inflation return remained high.

Nguyen Thi Kim Thanh, director of the Banking Strategy Institute, said the management of investment capital should be enhanced to ensure efficiency. — VNS

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