VEPR’s expert attended a meeting with the Prime Minister on measures to stabilize the macroeconomy

In the afternoon of February 22, 2011, Prime Minister Nguyen Tan Dung held a meeting with leading economists of Vietnam to get consultancy on macroeconomic policies in 2011.

The main purpose of the meeting was to get comments and feedbacks on the contents of the government’s draft decision on key macroeconomic solutions to control inflation, stabilize the macro economy and ensure social security in 2011.

There were many policy makers attending the meeting, including Deputy PM Nguyen Sinh Hung, Deputy PM Hoang Trung Hai, Deputy PM Nguyen Thien Nhan; Ministers of Ministry of Planning and Investment, Ministry of Trade and Industry; and Governor of the State Bank of Vietnam.

There were also 15 leading economists and experts at the meeting including Dr. Vo Tri Thanh, Mr.Truong Dinh Tuyen, Mr.Tran Xuan Gia, Dr.Tran Dinh Thien, Mr.Cao Sy Kiem, Dr.Tran Du Lich…

At the meeting, Dr. Nguyen Duc Thanh contributed with some opinions on policies to control exchange rates, prevent speculation and risks in the real estate market. Dr. Nguyen Duc Thanh also spoke on behalf of VEPR’s experts about their views on the current monetary policy of Vietnam such as increasing discount rate and refinancing rate simultaneously, and limiting the growing credits by adjusting reserve requirement ratio.

Dr. Nguyen Duc Thanh also put emphasis on the duration of the interest rate policy. In VEPR’s opinion, interest rate should be set at high level for at least 6 months to create trust in the stable prospective of the economy among the public. That conclusion was a result of a recent quantitative study of VEPR. Past experiences on inflation controls in Vietnam showed that during the past years, more often interest rate was reduced immediately after signs of low inflation ratesleading to the return of inflation right afterwards.

According to Dr. Nguyen Duc Thanh, Vietnam should not depend too much on the big state enterprises to stabilize the macro economy. The main reason was that those enterprises were also busines firms, thus they themselves had the characteristics of instability just like the economy. In addition, the responsibility of stabilizing the macro economy does not lie in the hands of businesses. . Thus, firms did not have any measures to do that job and in any circumstance that was against the rules of the market.

With respects to the provincial revenues that exceeded the targeted plan, Dr. Nguyen Duc Thanh said that it would take too long time to collect the excessive money to the government’s budget in the context of decentralization. Instead, the government should instruct each province to use them for subsidizing the local poor families as a measure of improving social security and stabilizing the macro economy.

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