In an interview granted to Vietnam News Agency, GSO Director General Nguyen Bich Lam said the government has succeeded in reining in runaway inflation in the context of difficult times.
There was growing concern about the recurrence of high inflation early this year when the prices of medical and education services, petrol, electricity, and gas would be adjusted as scheduled.
In fact, 17 provinces and cities hiked the prices of medicine and medical services by 19.5% against 2012, causing the national CPI to edge up 1.1% overall.
Vietnam was hit by a total of 15 storms this year, including the recent destructive typhoon Haiyan, causing great human and property losses and fuelling the prices of commodities in a number of localities.
Against this backdrop, it is vital that inflation was kept in check, with the rate hovering around 6%.
Lam attributed the low CPI to Vietnam’s bumper summer rice harvest, low purchasing power, and excess industrial inventories.
Above all, he appreciated the government’s impressive performance, taking prompt action to control inflation.
Ministries, agencies and localities put the government’s anti-inflationary measures in place, by keeping a tight grip on market prices, ensuring the market law of supply and demand, and combating trade fraudulence.
The State Bank of Vietnam introduced flexible monetary, exchange rate and gold market policies, contributing to reducing inflation. The deposit interest rate was cut from 18% in 2011 to 7% at present, and correspondingly the lending rate was also down from 23-25% in 2011 to around 10% in 2013.
Lam said the dollarization of the economy was no longer a major headache for the banking sector. The gap between global and domestic gold prices was narrowed due to saturated demands within the public.
He also gave reasons easing worries that the national economy has not yet bottomed out due to the low CPI and excess industrial inventories.
The national economy is recovering, he said, with the GDP growth increasing on a quarterly basis, from 4.76% in Q1 to 5% in Q2, 5.54% in Q3 and estimated 5.91% in Q4.
Industrial production is picking up, with the number of newly established businesses in the past 11 months rising 9.5% compared to the same period last year. In addition, 12,700 businesses resumed operation after a period of suspension.
11-month investment capital rose 6.8% and credit growth also edged up 7.54%. The 17.8% import rise means industrial production is recovering.
However, in Vietnam Lam said low inflation is too fragile to be controlled and high inflation is likely to edge up in 2014.
The National Assembly approved the government’s proposal to raise the 2014 budget deficit to 5.3% and issue more government bonds that will eventually increase the amount of cash in circulation. The government will go ahead with its roadmap for healthcare, education, electricity and water supply price adjustments.
Vietnam aims to keep inflation at 7% in 2014, and to meet this target the government needs to pursue its anti-inflationary policy, even when the rate is relatively low and stable, Lam concluded.