VietNamNet Bridge – The total value of goods in stock declined in the first six months as production output was lower than in the same period last year, said Nguyen Ngoc Tuyen, director of the Institute of Economics and Finance under the Ministry of Finance.

January-June retail and services sales marked up an estimated 11.9% year-on-year, according to the General Statistics Office (GSO). But without price elements, the figure only picked up 4.9%, much lower than the 6.7% in the same period in 2012.

At the seminar “Six-month price changes in the Vietnamese market and forecasts for 2013” in Hanoi on Thursday, Tuyen said low consumption would hinder economic growth and result in mounting inventories, then pushing up production costs and the consumer price index (CPI) as well.

“This is not the positive information that we expected,” he said.

Tuyen ascribed a drop in January-June inventories to lower industrial growth rather than higher consumption, citing GSO’s report indicating the inventory index steadily fell in the six-month period. However, with the inventory value compared to the production value, the current inventory, at 71% in May and 75.4% in the first five months, is higher than the normal 65%.

Besides, the growth of 5.18% in industrial production in the first six months is lower than the 5.59% in the same period in 2012 while total retail and services sales in the period were also lower. Tuyen, therefore, attributed the six-month inventory slump to the year-on-year low production value.

Economist Ngo Tri Long, meanwhile, quoted a report of the Vietnam Chamber of Commerce and Industry as saying lending rates have accounted for up to 24% of production costs of local firms over the past time. Upon interest rate cuts, the production value also decreased consequently, bringing more opportunities for enterprises to launch discounts to release inventories to cut losses.

Long expects companies will enter a new business cycle instead of keeping inventories and that stimulus policy will help them find outlets for products even though this will push up the CPI, estimated at 6.5-7%, in the final months of the year.

Source: SGT