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The Government should enforce recent fiscal policies to minimise inflation and stabilise the economy, said a WB economist.
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| Decpak Mishra speaking at the press conference |
“Steadfast and effective implementation of Resolution 11 should be maintained until the country reaches some milestones,” said Deepak Mishra, an economist for the World Bank in Vietnam, at a press conference in Hanoi on June 2. The conference was part of the mid-term meeting of the Consultative Group (CG) for Vietnam in 2011.
According to Mishra, three major “milestones” the country should strive for are taming inflation to single-digit rates, eliminating the foreign exchange rate, and increasing the foreign currency reserve to a level adequate to finance at least 2.5 months of prospective imports.
“It would take between six months and one year for fiscal policies to take effect,” he said.
Mishra also commented on public investment, saying, “Vietnam spends around 44% of its GDP on investment, mostly in state-invested projects. But the question is whether public investment is efficient. More attention should be paid to the productivity and efficiency of public investment.”
According to Victoria Kwakwa, Country Director of the World Bank Office in Vietnam, “The implementation of the Government’s Resolution 11 has already brought about positive results, including closing the gap in currency exchange rates between the official and the unofficial markets.
She added that, “The country has effectively implemented measures to curb inflation. However, the most important issue is not to change policies, but to maintain those that have already been implemented.”
At present, exchange rate, inflation and interest rates have been rising in the country while its international reserve has been falling down.
In order to attain sustainable growth, the Vietnamese Government should learn how to adapt to current challenges to maintain its tight monetary and fiscal policies, she attributed.
“The World Bank and international donors will continue to look at the implementation of these policies to make sure that they are properly enforced,” she added.
According to a World Bank forecast, Vietnam\'s inflation rate may peak at 22% by June of this year. If the nation maintains its tight fiscal policies, the rate may gradually fall to 15% by December.
On February 24, 2011, Vietnamese Prime Minister approved Resolution 11, which introduced austere measures to combat inflation and create economic stability. The Government hopes to limit credit growth rate to under 20% this year. At the same time it expects an increase of between 7% and 8% in the state budget revenues, and to limit the budget deficit to less than 5% of the GDP. |
