Shuvojit Banerjee, economic officer at the Bangkok-based UN ESCAP, said that declining inflation would help Viet Nam stimulate consumption and improve investor confidence.

Last year, the country had an inflation rate of 18.6 per cent – the second highest behind that of 2008 when the global economy fell into crisis.

Strong stabilisation measures were introduced to curb double-digit inflation.

Banerjee spoke at the launch ceremony of the organisation's annual 2012 Economic and Social Survey of Asia and the Pacific in Ha Noi and 30 other locations around the world yesterday.

If inflation continued to elevate, it could badly affect poverty and food insecurity, he said, noting that poor people in Viet Nam spent 60-70 per cent of their incomes on food as reported by the Institute for Economic Management (CIEM).

"The whole region, including Viet Nam, continues to face a challenging external economic climate, urging enhanced regional co-operation and domestic consumption," Banerjee said.

This would not only enable national policies to have greater influence at regional and international level, but also help countries like Viet Nam become less dependent on exports, he said.

Banerjee, however, said that streamlining Government expenditure and restructuring large State-owned enterprises to improve the quality of investment were still challenges to the country.

Dr Pham Thi Lan Huong, head of the CIEM's Marcro Economic Policy Department, said that there was proof of the connection between rising food prices and poverty in Viet Nam during the time of increased inflation.

The national poverty rate has jumped to 14.2 per cent in 2010 from 13.4 per cent in 2008.

Increasing commodity prices depressed the country from developing sophisticated products with high value that could help it keep up with high-income countries, she said.

To deal with high commodity prices, Huong said, the country should diversify its economy, create jobs, especially for the poor, and boost domestic consumption.

Moreover, increasing salaries needed to go in line with the increase of productivity, she said, suggesting more support for the poor to get jobs.

She also suggested other measures including the expansion of non-agriculture services, especially in the value chain, expansion of domestic markets for agriculture products and green agriculture with advanced technologies.

Viet Nam's National Assembly set a target to maintain economic growth at 6.5 per cent this year.

At a glance

- After the central and State-owned commercials banks stepped in with liquidity support to protect small and weak banks, the refinancing rate was reduced 200 basic points to 13 per cent from January to April 2012.

- The fiscal deficit of Viet Nam narrowed significantly in 2011, owing to strong revenues, particularly from oil export.

- However, Government expenditure growth was not in line with Resolution 11 commitments to cut investment expenditure by VND80 trillion (US$3.87 billion) or 3.2 per cent of the GDP by cancelling inefficient projects and postponing non-urgent one while restructuring large State owned enterprises.

- Led by strong garment and crude oil exports, the country's trade deficit in 2011 was the lowest in 10 years while remittances continued to grow heavily.

Source: vnagency.com.vn