Lowering lending interest rates will restrain inflation and that should be done soon to maintain and boost Ho Chi Minh’s economic growth, the city Party leader has said.
HCMC Party Committee secretary Le Thanh Hai made the statement at the 22nd conference of the Party Committee on June 29 to review economic performance for the January-June period and discuss tasks for the rest of the year.
The conference agreed that the city had taken a big leap in its economic development during the recent period, creating motivation to expand further in the near future.
The city’s GDP in January-June grew by 11 percent, a rate equal to that of the pre-crisis period of 2006-2007 and higher than the 8.5 percent growth of last year, according to a report delivered at the conference.
Retail sales and service revenue have increased by 21.3 percent so far this year, the result of the city’s price stabilization programs and the expansion of wholesale and retail sales networks across the city.
City People’s Committee standing deputy chairman Nguyen Thanh Tai attributed the good performance to the city Government’s flexible and appropriate economic policies during the period.
Mr. Hai said he agreed to the local Government’s solutions to constrain inflation, boost exports, cut down trade deficits, and improve the balance of payment of the city.
However, he asked the People’s Committee to coordinate with the State Bank of Vietnam to seek measures that would slash lending rates, since the current rate of 12 percent is unaffordable for large number of businesses, especially smaller enterprises.
Agencies concerned should work together to find the possible methodology to manage the interconnected relationship between interest, inflation and growth, he said.
“If the SBV pours a large volume of money into circulation to lower lending rates, they may put the economy at risk for high inflation,” he explained.
The Party leader was also concerned about the Consumer Price Index (CPI), which has increased along with economic growth.
The city’s CPI in June has increased by 0.35 percent since May and by 9.55 percent from what is was a year ago, he said.
Forecasters have speculated that the CPI would surge 10 percent higher in the near future, he said, warning, “If that is the case, it will greatly influence social security and may undermine public confidence.”
“High inflation will lead to a reduction in consumer spending, especially among the poor, expands the rich-poor gap and is detrimental to growth,” he stressed.
Regarding the current shortage of electricity that has led to regular power-outages, the Party leader required the electricity sector to prioritize the allocation of power to businesses, hospitals and schools.
Relevant agencies must propagandize the public to use power economically, in order to help ease the power shortage.
