The CPI in March hit a record high for the past 33 months, rising by 2.2 percent compared to February. This differs from most past years when CPI often fell after the traditional Lunar New Year months. In the first quarter of this year, CPI increased by 6.1 percent compared to last December.

According to a Government report on socio-economic development in 2010 and the plan for 2011 sent to deputies attending the 9^th session of the 12^th National Assembly, the CPI is estimated to increase 6.1 percent in the first quarter of 2011 as compared to 2010. Subjective and objective causes for rising CPI were analysied carefully, however, the main issue of concern is how the Government will contain inflation to provide security for citizens in this difficult situation.

The Government showed strong determination to establish order in the foreign currency and gold markets aiming to stabilise the exchange rate, reduce inflation and promote public confidence in domestic currency.

The Government will also strictly cut public spending. Eleven inspection teams led by the Ministry of Planning and Investment have been working with localities and State-owned economic groups. They proposed reallocating VND152,000 billion of State budget capital and VND45,000 billion in Government bonds to reduce State budget overspending from 5.3 percent to below 5 percent of the GDP. Regular spending will also be cut 10 percent.

It is not easy to cut billions in public investment capital because it will affect businesses, localities and projects beneficiaries. The lesson learnt from cutting public capital in 2008 is that it was not worth it. Spending on development surpassed 20 percent of the estimates and inflation hit a record high of nearly 20 percent.

There should be a proper plan, such as accelerating new methods of investment like Public-Private Partnership (PPP) projects and mobilizing social capital resources.

In 2011, the Government will carry out the heavy tasks of managing the macroeconomy and eliminating subsidies for many key input products as well as devising measures to contain inflation and strengthen social welfare.

There were some arguments in the past over growth targets and controlling inflation, which have different goals. Because of the pressure for high economic growth, many measures to control inflation were neglected.

According to the Politburo’s report on the 2011 socio-economic situation, this year and first years of the five-year plan until 2015 won’t focus too much on GDP growth in order to avoid high inflation and create a firm foundation for higher growth in the future.

The Politburo’s timely guidelines and proper management by the Government will contain the high inflation rate, stabilise the macro-economy and strengthen social welfare, thereby promoting more sustainable growth.

The World Bank has forecast that Vietnam’s GDP in 2011 will grow by 6.3 percent and the CPI will stand at 9.5 percent. The WB says that the adjustment of the State budget in 2011 and Resolution 11 show the Vietnamese Government’s determination to strengthen its financial accounts and gradually reduce the State budget deficit and inflation.