Crucial conditions for economic recovery

Curbed inflation stands as one of the outstanding economic achievements of 2014, with a 1.84% rise in the consumer price index (CPI), the lowest since 2001, contributing to stabilising the macro-economy thanks to insistent policies to maintain macro-economic stability and economic recovery.

Inflation was controlled more firmly than in 2012 and 2013, and CPI was much lower than the planned target of 7% for this year. The year-on-year inflation decreased steadily throughout the year, while the year-on-year average CPI was lower than 5% in March and merely 4.09% by the end of the year. Monthly CPI rises were not over 0.7%, and even fell in several months.

Illustration photo (Photo: Thai Thien)

Fiscal policy was implemented carefully. Many policies on preferential tax exemption and reduction were carried out to support and encourage investment in production and trade of both local economic sectors and foreign direct investment businesses. Meanwhile, regular and public investment spending was better managed to prevent losses and wastefulness, improve the effectiveness of State budget spending and control spending more closely.

Credit and monetary policies were monitored carefully, yet flexibly. Interest rates were lowered in line with the reduction of deposit interest rate caps and inflation’s fluctuations. This year’s total credit rose over 10% to meet capital demands of the economy, while the system of credit institutions were improved and bad debts were drastically addressed. Stabilised exchange rates made positive contributions to increasing exports, raising trade surplus, the surplus balance of payments and foreign exchange reserves to records and creating an attractive environment for both direct and indirect foreign investment.

In addition, price management policy was synchronised better with other economic policies towards a common target of curbing inflation. Prices of such main materials as power, coal, oil and gas were adjusted more flexibly in closer coherence with developments of supply, demand and prices in international markets. The prices also reflected clearly positive results in restructuring State owned groups and corporations, enhancing monitoring over production and trade costs of State owned enterprises, which played a key role in materials and fuels.

Market management did not see the price booms which occurred several years ago.

Controlled inflation has created a crucial condition for economic recovery, in which the gross domestic product rose by 5.8% over the set plan, and the total investment demand and total consumption demand continued to increase over the previous year. Low inflation in 2014 is a basis to maintain macro-economic stability and control the inflation in 2015 when the country’s economy is expected to continue recovery with greater speed; international markets still face unpredictable changes; and the trend of deflation, even disinflation may occur in a number of countries and regions.

(Source: nhandan.org.vn)