Vietnamese businesses are strictly implementing the Prime Minister’s guidance on ensuring a sufficient supply of essential goods and keeping prices down in order to maintain a stable development of the national economy until the end of June, and to control the soaring inflation. However, this is only a temporary measure as the prices of energy, material and fuel in the global market are still spiraling amid the fear of a global economic recession.

The important question is to analyse the strong and weak points of the economy in a bid to find a reasonable and effective measure aimed at minimising the negative effects of the slowdown in the world economy and helping the Vietnamese economy get over hurdles.

In the past, if the price of a product keeps rising for a long time without any effective measures being put in place to stablise it, the national economy will be adversely affected.

Last year, petrol prices soared for 14 months after a sharp increase in global petrol prices. With diesel rising by 61 percent and mazut by 85 percent, Vietnam had to increase prices, putting businesses and individuals in a difficult position.

In the context of fluctuations in the world economy, the Government should map out solutions for stabilizing the prices of essential goods such as petrol and oil, electricity and coal by early July.

Dr Nguyen Duc Kien, a member from the National Assembly (NA) Committee for Economic Affairs said that the relevant agencies are currently considering more effective solutions for controlling the inflation index and ensuring stability in people’s lives.

After June 30, there will be two scenarios. The first is to continue keeping the prices as high as at present on the condition that the input elements of the world economy remain stable and vice versa, if the input elements of the world economy continue to increase sharply, the second scenario will come about, requiring the Government to set targets to curb inflation while maintaining a sustainable growth over the next years.

Vietnam is now facing the threat of the soaring inflation as the world economy is so unstable. The Vietnamese economy is greatly affected by the current globalisation process due to the high prices of input fuel, the shifting of global financial capital inflows and the downturn of the world’s leading economies such as the US and some EU countries. Therefore, in order to curb inflation or set development targets, it is essential to give an overall evaluation of the world economy.

The global economy is currently encountering two crises. The first is the financial crisis caused by the unsecured credit market in the US whose losses so far have risen to US$1,000 billion, much higher than the Asian financial crisis in 1997 and 1998. It is predicted that the losses will be greater in the near future.

Up to now, food prices have hit a record high due to the world food crisis and it will take three to five years to get the situation under control. Vo Tri Thanh, head of the economic integration department under the Central Institute of Economic Studies and Management, said that according to the latest assessments by international economics organizations, if the worst scenario takes place, with the US facing economic recession (meaning that economic growth will be zero percent also consumption growth, zero percent, private investment will drop by 30 percent and the US dollar will depreciate by 20 percent from now to the end of this year) there will be a strong impact on the global economy.

East Asia is considered an area with large potential for achieving the highest growth in the world. However, China’s economic growth is forecast to fall 3.3-percent compared to its current set target. It’s worth noting that at present Vietnam’s macro-economic index is not better than that of other countries in East Asia. The country’s trade deficit still remains high, while most East Asian countries are producing a surplus. Therefore, if the foreign exchange market is not adjusted effectively, the exchange rate will face strong fluctuations, thus making it more difficult to adjust policies on exchange rates, Mr Thanh added.

The world economy experienced a financial and employment crisis from 1997-1998, but now it is suffering a crisis of shortages. There is a severe shortage of many kinds of essential goods that are needed for the world’s economic development and stability, such as oil, energy, industrial machines and food.

The current world economic crisis is far different from that in 1997-1998. Hence, it is necessary to have more flexible measures. International economists say this is necessary to handle the crisis and to prevent a runaway inflation, it is vital to have good monetary policies in order to facilitate the development of production. If Vietnam’s monetary policies are implemented in a suitable way and local businesses know how to make use of the situation when the world is facing many shortages the country should avoid a crisis. The lack of food remains a problem but is there us a boost in production and an increase in the supply of goods in the domestic and foreign markets, the country can come through the difficult time.

According to Doan Trong Ly, chairman of the administration board of the Agricultural Produce Import and Export Company (Aprocimex), capital sources should be ensured and give priority to the production of goods. “If not, we cannot develop production, curb inflation or prevent price rises,” he said.

“When production increase and supply-demand is balanced, market prices will then stabilise. Currently, many businesses are still facing difficulties in mobilising capital sources. For instance, we now have to pay a rather high interest rate of 14-percent to banks. I think, the rate should better be at 12 percent,” he added.

If production activities are promoted in a suitable manner, businesses will have the opportunity to make profits and the State will get a higher proportion of income from tax collection to help to ensure social welfare. At present, price hikes have not been seen in essential goods and businesses should cooperate effectively with each other and make use of every opportunity to overcome the current difficulties and mobilise all sources to further boost production. Besides, they should also make thorough preparations to deal with any negative impacts that may emerge from the world economic recession.