Loosened policies might be no help for economy
By Tu Hoang - The Saigon Times Daily
HANOI – The Government is gradually loosening the fiscal and monetary policies in a bid to tackle the economic downturn, but the move has yet to give any positive sign to the economy, and experts say such a change might bring no help.
Regarding the monetary policy, Phan Thi Thanh Binh, co-head of ANZ Bank’s global markets, observed the State Bank of Vietnam (SBV) had taken many measures to support the economy.
SBV has lately allowed several banks to have credit growths exceeding the maximum target of 17%. In addition, the central bank has given the nod to debt payment extension and debt restructuring, she said.
Furthermore, SBV sets a credit growth target of 8-10% for the second half of the year, after credits only inched up 1.06% in the first half, a record low in as many years.
The SBV governor has recently signaled that the deposit rate cap might be reduced to below 8% if CPI fell to under 7%. In the first six months, the key policy rates were slashed by five percentage points.
“Such interest rate cuts are rapid and strong, and beyond expectations of many people,” Binh told the media on Wednesday.
“Those moves suggest that the central bank is loosening the monetary policy,” she added.
Moreover, the fiscal policy also shows signs of easing after the Government announced to advance VND30 trillion from the 2013 State budget spending for public investment in 2012. Additionally, some VND21 trillion will be pumped into the economy every month in the rest of the year under the fiscal plan.
Such moves, according to Binh, are aimed to support the economy currently struggling with choked off credits, rising bad debts, mounting inventories and high rate of business bankruptcy.
When asked in which way the aforesaid measures would affect inflation next year, Binh quoted the central bank governor as saying that the Government would tighten the monetary policy in this year’s fourth quarter to prevent high inflation from coming back in 2013.
Such a standpoint can be seen as policy hiccups.
Meanwhile, economic expert Le Dang Doanh stated now is not the right time to stimulate the economy.
“Loosening monetary and fiscal policies now may fuel inflation later,” he stressed.
Doanh said the economic operators should learn from experience of the past five years, when the country was stuck in a vicious circle of curbing inflation and tacking downturn.
Furthermore, loosening these two policies might foster the greed of many investors and enterprises with plans to do business recklessly.
“The most important thing is to restructure the economy to create a foundation for efficient economic activities,” Doanh underscored.
Sharing this view, Binh said the economic restructuring programs must be deployed in a proper way to gain investors’ confidence in sustainable growths in the long term.
“But the point is the economic restructuring programs announced recently show no major breakthrough. Even the State-owned enterprise restructuring program does not include any new point. We haven’t seen the quality in such programs,” she remarked.