Tuesday , April 23 2024

Experts at odds on inflation threat

Economists are divided on how the government should handle the rising inflation amid global headwinds.

Deferring public spending due to fear of inflation would mean frittering away opportunities, and officials “need to think unconventionally during unusual circumstances,” Tran Dinh Thien, former head of the Vietnam Institute of Economics, said at the Vietnam Economic Forum Sunday.

The economy has the momentum to recover, he assured.

Even if the government does not pump more money into the economy, inflation would rise as it is out its hands, he claimed.

The government could simply accept an inflation rate of more than 4 percent and pump more funds into the economy, he added.

Inflation in the first five months hit 2.25 percent against 1.29 percent in the same period last year.

Of the 11 main categories of consumer goods and services, 10 saw prices rise in May, mostly because gasoline prices rose and had a knock-on effect on others.

Lender HSBC said in a note last month that inflation would only be 3.7 percent this year, well under the government’s cap of 4 percent.

But Vu Thanh Tu Anh, dean of the Fulbright School of Public Policy and Management, is concerned the rate would be higher.

Russia-Ukraine war and inflation of over 8 percent in the U.S. and the E.U. are causes of concern, he said.

Vietnam has yet to face the full brunt of this since there is usually a lag, he said.

Pumping more money into the economy at this time could have negative consequences, and the country should be careful with its monetary policy, he warned.

Foreign experts said Vietnam should continue to watch the impact of global inflation.

Andrew Jeffries, country director for the Asian Development Bank in Vietnam, said the easy monetary policy in the U.S. and the E.U. could cause fuel prices to rise.

Francois Painchaud, the International Monetary Fund’s representative in Vietnam, said the country could not relax its monetary policy now, and banks should increase reserve requirements.

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