Permanent member of the National Assembly Financial Committee Dr. Bui Duc Thu told the Thoi bao Kinh te Viet Nam (Viet Nam Economic Times) that the monetary tightening policy may suffocate the economy.
Some people say that inflation in 2012 will fall of its own accord without any intervention by the Government. How do you respond to this?
I don't agree.
From 2009 – 2010, credit was a lot more accessible, and debt subsequently increased by 30 per cent year on year. Meanwhile, the gross domestic product (GDP) in 2009 increased by only 5.32 per cent, by 6.78 per cent in 2010, and last year, rose by 5.89 per cent. This situation has had a serious impact on our economy. As a result, annual inflation jumped by over 18 per cent in 2011. If the Government had not taken tough measures to tighten fiscal and monetary policies, including reducing public spending, State Budget overspending and curbing rapid credit growth, I think the inflation rate in our country would have been much higher.
If the key objective is to control inflation, it is not a big deal. In my opinion, inflation will be controlled by the Government's strict fiscal and monetary policies.
But we want two things to happen at the same time – to control inflation while maintaining stability with high economic growth. This is a very tough demand.
We should remember that in 2011, the rapid decline in growth caused difficulties for many businesses, particularly the high borrowing interest rate of 20 per cent per annum.
According to the Government, the only way to curb inflation is by tightening monetary policy. Does this mean there are no other options left?
I strongly support the Government's resolve to control inflation and the measures included in Resolution 11/NG-CP.
In my opinion, it is imperative to implement a strict monetary policy. Yet to make it more effective than the previous year, the Government should review the lessons learned in 2011 to establish what worked and what didn't.
To control inflation, I don't think that we should continue to apply stronger monetary tightening policies. Instead, we should look at how we can control the financial situation and be pro-active in restructuring enterprises, credit organisations and banking institutions. That's the best way to ensure good capital flow without having a negative impact on inflation.
If we try to tighten our belts even further to control inflation, it could "suffocate" the economy.
The Government has defined 2012 as a pivotal year for the process of economic restructuring. What's your opinion on that?
Economic restructuring is an important task. It is as important as fighting inflation.
In the process of economic restructuring, I believe public investment is key. At present, the demand for capital investment in socio-economic infrastructure in our country is huge, but the Government is only able to meet part of it. As a result, there should be a mechanism or policy to mobilise capital investment from different sources, particularly from the private sector. If we cannot do that, I don't think that reduction in public investment will work. It would have negative impacts on the effectiveness of public investment, the investment environment and the country's economic growth. — VNS