The Hanoi Times – Senior experts Vu Dinh Anh, Deputy Director of the Price and Market Research Institute, and Cao Sy Kiem, former Governor of the State Bank of Vietnam, both have affirmed that the petrol price increase of 1,000 dong per litre will not lead to high inflation.
The decision by relevant ministries to raise petrol retail prices by 1,000 dong per litre has raised concerns that it will bring about the price increases of a lot of goods. What do you think about the possible impacts of the petrol price increase?
Cao Sy Kiem: Any petroleum price increase will influence the prices of other goods. However, the recent petrol price increase was not so unexpected and the price increase was not too sharp to have severe impacts on the prices of goods and services.
Vu Dinh Anh: The petrol price increase will, to some extent, affect the price ground in the national economy. However, when we adjust the petrol price, we need to think also about reducing the negative impacts of the price increases.
We still cannot float petrol prices right now; petrol pricing still requires the intervention of the state to ensure the fulfillment of macroeconomic targets. Petrol pricing needs to be regulated based on the important indexes of the national economy.
It is necessary to identify the factors that may increase inflation, the standing level of the national economy when considering adjusting the petrol price, since petroleum prices affect consumption, investment, production and business.
Do you think that the price increase will lead to the high inflation?
Vu Dinh Anh: I don’t think that the price increase will heighten the risk of high inflation because the price increase is not big. In 2009, we are capable of curbing inflation at a one-digit level. Inflation has just reached 2 percent so far this year. Therefore, a risk of high inflation has not appeared with the petrol price increase.
Cao Sy Kiem: High inflation may originate from many reasons, and the biggest reason could be a big volume of cash put into circulation.
However, whether or not a big volume of cash in circulation can cause inflation still depends on management capability. For example, when we put a big volume of cash into circulation under the demand stimulus programme, and the cash goes to the right addresses, this creates purchasing power and encourages production. In this case, there are no big problems. When demand increases, circulation is pushed up, which allows us to take back money from circulation to fight inflation, if necessary.
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