Macroeconomic stability must be focus for Vietnam: Central Institute for Economic Management

Dr. Vo Tri Thanh, vice director of the Central Institute for Economic Management, spoke to the Daily on the country’s economic situation from now to the year’s end. Excerpts:

The Saigon Times Daily: There is suspicion that rapid interest rate cuts are signs of monetary easing. What do you comment on this?

– Dr. Vo Tri Thanh: In theory, how interest rates are set reflects the reality of money supply. However, the relationship between interest rates and money supply in Vietnam has always been unclear. Sometimes, interest rates pick up, and so does money supply, or vice versa. At present, interest rates are in decline but money supply does not rise.

What are your forecasts of economic trends in the years to come?

– (Economic woes) will continue. The way the world, or Vietnam, rescued the economy in the 2008-2009 crisis cannot be repeated. At the time, it was essentially pumping money through fiscal and monetary policy. Injecting money into the economy is an impossible mission at the moment since different and sustainable solutions are preferred. This is a turnaround for not only Vietnam but also the world economy. Growth and development models should be changed, leading to pain and loss of time.

In short, stability must be a focus, instead of injecting money into the economy. Moreover, stability is a prerequisite to change the way of doing business or making investments.

As for the world, there are currently four imbalances that require time to handle. The first imbalance lies between the real economy and the virtual one when financial bubbles are too big. The second is between the real economy and sustainable development and the environment. The third is the East-West imbalance, meaning the U.S. always suffers deficits, while East Asia has economic, trade and investment surpluses. And the last is the internal imbalance such as the euro zone public debt crisis. These four issues cannot be addressed soon.

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