INFLATION CONTROL OF VIETNAM 2012

Ms. Busaba Butrat

Thai Trade Center Hanoi

May 2012

Key indicators For 2011 & Targets for 2012

Indicators 2011 Targets for 2012

GDP (%) 5.89% 6.0- 6.5%

Real GDP (US$ billion) 122 135

Export (US$ billion) 96.90 99.7 – 107.4

Import ( US$ billion) 106.75 111.7 – 119.8

CPI (%) 18.58 Under 10%

• One of the “hot” problem affected to Trade and investment of Vietnam is Inflation rate which has been starting since 2011 & shown by a high Consumer Price Index (CPI) of 18.58% for the whole year.

• Vietnam has entered the year 2012 with the same problem of Inflation threat so one of the main targets set by the government is to control the CPI with one digit (under 10%) for the year of 2012.

Factors may lead to the high CPI in the beginning of 2012

Internal factors:• Uncertainty of the development;• Lack of competitive ability of enterprises in the

markets;• Difficulties in production due to the increase of cost

and international competition;• Bad debt & low effects of the banking and financial

system operation…

External factors:• Recession of the global economy and public debt;• Tendency of using non- tariff barriers from a number

of big markets such as America, EU, Japan, etc…• Pressures of high inflation increasing globally, etc…

Measures to manage CPI • implementation of strict measures to tighten money

supply and credit growth, and enhance the management of state budget spending and public investment is the main reason for the CPI slowdown;

• decrease in the purchasing power of the domestic market, while bumper crops have effectively reduced the prices of agricultural products and foodstuffs;

• strict implementation of measures to strengthen market and price management, has also contributed to reducing the CPI growth rate;

• carry out tight and cautious monetary policy toward ensuring the proactive flexibility and harmony between monetary policy and fiscal year policy to curb inflation in 2012 at about 8 to 9 percent.

CPI in the down trend

CPI for 2011 & the first 4 months 2012

Results for the 1st four months 2012

Indicators 1st quarter 2012

End of April 2012

Increased rate of GDP +4.0% N/A

Increased of rate of agricultural, forestry and fishery ‘s GO +3.7% N/A

Increased rate of Industrial Index production (IIP) +4.1% +4.3%

Total increased retail sales of goods and services +21.8% +21.6%

Increased rate of total export turnover +23.6% +22.1%

Increased rate of total import turnover +6.9% +4.4%

Increased rate of foreign visitors +24.5% +22.9%

Increased rate of investments under State Budget compared with yearly plan 2012

19.% 27.8%

Increased rate of CPI of the first quarter 2012 compared with the same period of time in 2011

+15.95% +14.57%

Trade for the first 4 months 2012

• Export increased more than Import for the first 4 months leading to the low rates of trade deficit with 1.0 % and 0.5% of the total export turnover for by the end of March and April respectively.

1st quarter 2012

Compared with the same

period of 2011

End of April 2012

Compared with the same period of 2011

Export 24.5 US$ billion +23.6% 33.4 US$ billion +22.1%

Import 24.8 US$ billion +6.9% 33.6 US$ billion +4.4%

Trade Surplus

251 US$ million 1.0% of total export turnover

176 US$ million 0.5 % of total export turnover

Single digit CPI: Gains & Risks

Gains:

• Control Inflation rate to guarantee the living cost;

• Stabilize the macro – economy;

• Promote for export;

• Control the budget surplus with the reasonable rates;

• Reduce the trade surplus rates;

One digit CPI: Gains & Risks

Risks: . Low demand in consuming leading

to the recession of production of the economy;

. Number of enterprises halted operations and bad debt rose;

. Import declines while the production of most heavy industries rely on imported materials;

. GDP is at the modest level;

Current Difficulties and solutions

DifficultiesDifficulties• Banking interest fell but remained

high;• Enterprises struggled to absorb

capital while the bank cannot lend;• The rate of industrial growth is lower

than the same period last year;• Purchase Power decreases sharply;• Investment decreases especially from

the foreign investment sources;• Living conditions fell into difficulties;• Import decline significantly;

Current Difficulties and solutions

Solutions. Continue trying to control inflation by lowering

CPI under 10% for the whole year;. Continue to lower the interest rates;. Offer supports to ease difficulties for

enterprises particularly small and medium sized business;

. Priorities to the groups of businesses to promote for export and balance import to have good serve for production;

. Accelerating the restructuring of the banking and financial sectors as well as the economy toward industrialization;

Thank You !