Vietnam inflation continues to fall

For the second straight month, Vietnam’s inflation has fallen, however analysts have indicated that, although this is a step in the right direction, the government can still do more as the monetary policy can still be tightened further.

The government have used a tighter control of credit, however this measure can only be seen as successful due to the global fall in commodity and energy prices.

Focus instead should be on the country’s macro economy as it is still not in a stable condition.

Due to the high interest rates, local companies have been affected as they are unable to secure credit due to the governments iron fist on credit control, even though inflation has responded to the measures introduced.

During the period, monthly food prices have fallen by 0.4 percent, although rice export has suffered as it is down 15 percent as global prices continue to decline.

Construction materials have also stabilised as they are down by 4 percent from last month.

Inflationary pressures are still very much in existence and the balance of payments deficit is still hurting the country. However with stronger emphasis on state-owned enterprises, the negative effects on private enterprise will be lessened.

The Vietnamese Prime Minister, Nguyen Tan Dung, said last week that the annual inflation rate for 2008 would be 24 percent, although the aim was to reduce it by 15 percent for 2009.

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