VietNamNet Bridge – Despite the low CPI increases over the last several consecutive months, the government of Vietnam does not intend to hurriedly loosen the monetary policy for the fear about the high inflation.

The consumer price index (CPI) in May 2013 decreased by 0.06 percent in comparison with April. This was for the second time in the year Vietnam saw the minus CPI, which has raised worries about the deflation.

Though the 0.06 percent CPI decrease is not big, it is worrying in the eyes of some analysts, because the CPI has been decreasing repeatedly in the last several months.

In April, the CPI increased modestly of 0.02 percent over March, the 10-year smallest increase. Meanwhile, in March, the index decreased by 0.19 percent over February. As such, the CPI has increased only by 2.35 percent so far this year and 6.74 percent in comparison with the same period of the last year.

Especially, the weak market demand has given the analysts one more reason to worry about the deflation. The total goods and services retail turnover in May 2013 only increased slightly of 0.8 percent over the same period of the last year, while the increase in the first five months of the year was 11.9 percent. However, if not counting on the goods price increases, the turnover increased by 4.8 percent only, a very modest increase which is just a half of that in previous years.

Vu Dinh Anh, a well-known economist, when asked about the risk of the deflation some days before the May’s statistics were released, said that he could not see any worrying problems, stressing that this would be problematic only if the CPI decreases continuously for one quarter.

Meanwhile, most economists still think that the government should be too hasty to loosen the monetary policy amid the risk of the deflation, reflected in the low CPI increases. They said that Vietnam may still see the high inflation to return at any time, which would destroy the national economy.

Minister and Chair of the Government Office Vu Duc Dam, at a recent press conference, affirmed that the government has been consistent with the policy which aims to stabilize the macro economy, curb the inflation and ensure a reasonable growth rate.

Trinh Quang Anh from the Investment and Development of Vietnam Group has noted that the push cost would lead to the price increases.

Anh said that the selling prices of goods and services have been kept stable or have decreased, while the input costs all have increased. It is because enterprises have to stabilize the prices to stimulate the demand, while accepting loss.

However, they would have to find the way to raise the selling prices, sooner or later, to cover their higher expenses, once they see the market demand increasing again.

Meanwhile, the prices of essential goods and services such as electricity, coal or healthcare services which have been stabilized would also increase in the near future as planned by the government.

The threat for the high inflation also comes from the money supply to the national economy. The government has approved a big bailout worth VND30 trillion which would be pumped to rescue the real estate market.

“The minus CPI would not last more than one more month,” said Quang Anh.

SGTT