The economy will have to ââ‚¬Å“pay a high priceââ‚¬ if the government tries too hard to keep inflation under 7 percent this year, an economist has warned.
Although it would be dangerous if inflation hit 10 percent, efforts to hold it below 7 percent could end up putting a freeze on the local stock and property markets, said Nguyen Duc Thanh, director of the Center for Economic and Policy Research at the Hanoi-based College of Economics, Vietnam National University.
ââ‚¬Å“If the government tightens fiscal and monetary policies more than it should, production will be put on hold and itââ‚¬â„¢s even more likely for consumer prices to surge,ââ‚¬ Thanh said.
Vietnamââ‚¬â„¢s annual inflation hit its highest level in 10 months in February, the month of the Tet Lunar New Year festival. The consumer price index rose 8.46 percent from the same month in 2009 and increased 1.96 percent from January, according to official statistics. The governmentââ‚¬â„¢s target is to keep inflation below 7 percent this year.
Nguyen Bich Lam, deputy head of the General Statistics Office in Hanoi, said itââ‚¬â„¢s unlikely that the target can be achieved this year.
Consumption has begun to grow amid an economic recovery, pushing prices up, Lam said, noting that increases in power, fuel and water prices this year would make the task of containing inflation even harder this year.
ââ‚¬Å“This year, if the government can pull off keeping inflation under 10 percent, it will be a great achievement already,ââ‚¬ he told the Vietnam News Agency.
There will be a tradeoff between inflation and economic growth this year and the government may need to give up the inflation target, Lam said.
Vietnam is aiming to achieve an economic growth of 6.5 percent this year.
Reported by Thanh Nien staff