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The central bank bases its monetary policies by using core inflation as its measure. Monetary policies are basically actions and communications the central bank does to manage the money supply. Currently, the core inflation of 1.96 per cent in June 2019. It was at a high of 2.2 per cent in April 2015 when the Government first announced the core inflation and it was a low of 1.18 per cent in January 2018. Analysts predict inflation will continue to rise if the Government does not intervene. The rise of inflation is due to the excessive money supply in the economy. There is excessive money supply as there has been a growing number of domestic selling stakes to foreign investors in the recent years. In 2017, their total value was US$10.2 billion but in 2018 it decreased to US$7.64 billion. However, in 2019, their total value has even exceeded US$5.4 billion.

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Some experts have said recently there is an excessive money supply in the economy.

They pointed to core inflation of 1.96 per cent year-on-year in June this year, warning this is the correct measure of prices rather than headline inflation, which most people follow in the country.

Headline inflation includes items such as food and energy prices, whose prices tend to be much more volatile.

On the other hand, core inflation, also called non-food inflation, is calculated from the consumer price index minus the food and energy components, and is the measure on which the central bank bases its monetary policies.

In Việt Nam, the General Statistics Office is responsible for tracking both.

The Government started announcing core inflation in April 2015. It reached a high of 2.2 per cent that very month and a low of 1.18 per cent in January 2018.

The experts blamed its surge to 1.96 per cent in June this year to the rise in money supply.

In the last two years, the market has seen an increasing number of domestic businesses selling stakes to foreign investors. According to data released on July 23 by AVM Vietnam, since 2018 the country has emerged as a major M&A market in Southeast Asia with many large deals being consummated.

Last year, their total value was US$7.64 billion, down 25 percent from 2017's record $10.2 billion though that included the $5 billion ThaiBev purchase of Sabeco. Minus that the value of M&A deals last year increased by 41.4 percent.

This year it has already exceeded $5.4 billion.

To mop up the dollars coming through these deals, the State Bank of Việt Nam (SBV) injected VNĐ140 trillion (US$6 billion) in 2018 and VNĐ210 trillion ($9 billion) this year.

Seeing the increasing amount of money sloshing around in the economy, the central bank has begun to take measures to restrict it this year and in early 2020, one of which is to strengthen control over banking credit growth: It has said it is determined to keep it credit growth 14 per cent this year despite signs of slowing economic growth.

The Ministry of Finance has issued a draft circular on the management of non-term deposits at banks requiring all non-term deposits made by the State Treasury to be sent to the SBV's account at the end of each working day.

This is aimed at mopping up liquidity since the treasury's deposits in three State-owned lenders - Vietcombank, BIDV and VietinBank - make up a large share of their total deposits.

Analysts fear inflation will rise to 3.2-4 per cent this year if the Government does not intervene strongly.

If it decides to increase the prices of some essential goods or loosen monetary policy to stimulate growth, the rate is likely to be even higher, they have warned.

But they also believe inflation could be kept at the level targeted by the National Assembly if price management regulations are implemented properly.
Tour companies, private airlines find air charter lucrative
In June, Thiên Minh Aviation Joint Stock Company received the licence to establish an airline with a charter capital of VNĐ1 trillion (US$43 million) to become the sixth airline in the country.

The company, a subsidiary of Thiên Minh Group (TMG), one of Việt Nam's leading travel and hospitality companies, is headquartered in the central tourist town of Hội An. Its three shareholders are Thiên Minh Tourism JSC, which owns 30 per cent, Trần Trọng Kiên, the group's chairman (60 per cent), and Trần Hằng Thu (10 per cent).

The licence allows the company to operate in seven sectors, including passenger services, freight transport and aircraft leasing.

Tourism company Vietravel Group has also applied to establish an airline, Vietravel Airline, headquartered in the central province of Thừa Thiên-Huế. It will also have a charter capital of VNĐ1 trillion.

In July, the Hà Nội Department of Planning and Investment issued a licence to Vinpearl Air Joint Stock Company, a subsidiary of Vingroup.

The airline will fly on international routes and have a fleet of at least 30 aircraft.

In the first quarter, the aviation industry also saw the establishment of Bamboo Airways, which has reportedly operated 1,319 flights in just over three months.

The country's five operational carriers now are Vietnam Airlines, Jetstar Pacific, Vietjet Air, Vietnam Air Services Company (a subsidiary of Vietnam Airlines) and Bamboo Airways.

Market observers said most of the airlines including new carriers have operated/ planned to operate their business through provision of air charter service or aircraft lease to cut costs and make profits.

They said aircraft lease and charter flights have long been popular around the world, but they have still really developed in Việt Nam since private and budget airlines are established.

Airlines lease aircraft -- from other airlines or leasing companies - to either use them without the financial burden of buying them or for a temporary increase in capacity.

Charter flights can depart according to the schedule set by the tour operator, with flexible flight times, which is particularly suitable for large groups of tourists. Besides, a travel company chartering a plane can request the carrier for flexible flight services to any airport it is entitled to use.

Charter services' advantages like time and cost savings are thus obvious. It is estimated that tour prices can be cut by 20-30 per cent with the use of charter flights.

So, to utilise the advantages of the air charter services, many major travel companies with deep pockets are beginning to offer charter flights to attractive destinations at home and abroad.

For instance, Vietravel began charter flights in 2017. The next year alone it chartered nearly 300 flights from Vietnam Airlines, Vietjet and Jetstar Pacific to carry 852,000 tourists. Its turnover increased 18 per cent to VNĐ7.476 trillion that year.

Vietnamese airlines have begun to take advantage of these opportunities.

In 2016, Vietnam Airlines leased three Airbus A350 aircraft that were to be delivered over the next two years.

The smaller carriers are offering attractive incentives to tour operators chartering aircraft.

Low-cost carrier Vietjet Air's revenues from air charter surged from VNĐ412 billion in 2014 to VNĐ2.632 trillion in 2016. On average, one in every four flights was chartered.

According to Jetstar, the charter of flights is quite modest on domestic routes, but high on international routes. Bamboo Airways plans to develop charter flights focusing on domestic and Northeast Asian destinations.

According to travel experts, 2019 will see a surge in the charter of flights with the strong development of MICE tourism.

This is expected to provide Vietnamese more opportunities to discover their native land at competitive prices.VNS

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Some experts have said recently there is an excessive money supply in the economy. They pointed to core inflation of 1.96 per cent year-on-year in June this year, warning this is the correct measure of prices rather than headline inflation, which most people follow in the country.

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Vietnam unemployment rate is highest in the colleges graduated at 4.1%, followed by intermediate education and university bachelors at 2.61% and 2.57% respectively. This number indicates the ineffectiveness in the education system of the country. The reason is that people today prefer stable jobs rather than changing jobs. However, manufacturing and hospitality are the hottest industries and the demand for workers in these industries. The finance and banking industry is also prospering with a need of workers. However, the demand for workers in agriculture, forestry and fisheries industries dropped which is a factor to the increase in unemployment rate in Vietnam.

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Vietnam unemployment rate - A wake-up call for education system

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Vietnam unemployment rate is really high even in the bachalors group. It is a serious wake-up call to the Vietnamese education systsem.

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Fiscal policy helps to control public debt in Vietnam

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Fiscal policy helps to control public debt in Vietnam

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Over the past few years, Vietnam’s public debt has been declining, from 64.6% of the GDP  in 2016 to 58.4% in 2018 and has been expected to fall to 56.1% in 2019. This shows that the public debt has been managed by the government successfully. In Vietnam, under the law on public debt management, the public debt includes governmental debt, government-guaranteed debt and debt accumulated by localities. Vietnam has been using fiscal policy, lowering the country’s spending by limiting the number of new government guarantees which has led to the decrease in public debt. The public debt to GDP ratio is also expected to decline even further as Vietnam is committed to their fiscal policy. The GDP is also at a rise which leads to the decline of the public debt to GDP ratio and helps lower the financing costs in Vietnam.

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The government has reported to the National Assembly (NA) that the country's public debt is estimated to be reduced to 56.1% of GDP, from 58.4% of GDP in 2018, and 64.6% in 2016.

This means that the public debt has been well controlled, ensuring national financial security, and is far lower than the permissible limit of 65% of GDP set by the legislature.

The Economist's Global Debt Clock showed that, by last week, Vietnam's public debt in GDP stood at 45.6%, and per capita public debt was US$1,039.67, while total public debt was close to USUS$94.85 billion. All the figures remained the same as they were in early 2019.

Under the existing Law on Public Debt Management, public debt includes governmental debt, government-guaranteed debt and debt accumulated by localities. The government-guaranteed debt embraces local and foreign debts held by state-owned enterprises and financial and credit organisations.

According to Francois Painchaud, resident IMF representative for Vietnam and Laos, in recent years, the Vietnamese government has successfully conducted significant fiscal consolidation, and strictly limited new issuance of government guarantees, reversing the swift increase in public and publicly guaranteed debt.

"Consequently, public debt fell to 55.5% of GDP at the end of 2018 from 60% at the end of 2016 (based on government finance statistics classification)," Painchaud said. "Going forward, Vietnam's debt-to-GDP is expected to fall further due to the authorities' commitment to prudent fiscal policy, and also the forthcoming GDP revisions. This may help improve Vietnam's credit rating, lowering its financing cost, which may also positively affect businesses' financing costs."

He added that in order to help limit future fiscal deficits, adequate revenue mobilization should be preserved, considering declining official development assistance (ODA), and oil and trade revenues. Although Vietnam is still enjoying favorable demographics, an acceleration of pension fund reform is needed to improve the coverage, adequacy, and sustainability of pensions.

Under IMF staff's baseline, public debt would continue to decline to less than 50% of GDP in 2024.

Last month, Singapore-based ASEAN+3 Macroeconomic Research Office (AMRO), a regional macroeconomic surveillance organisation, released its annual consultation report on Vietnam, stating that a robust GDP growth of 6.6% this year and 6.7% next year, along with a tightened fiscal policy strictly in line with a five-year medium-term fiscal consolidation plan "would help contain public debt growth and reduce debt levels."

Under baseline assumptions that the average GDP growth rate is at around 6.7% per annum, Vietnam's public debt-to-GDP is forecast to gradually fall from 58.4% of GDP in 2018 to 57.4% this year, and to 54.6% by 2023, according to the report.

"The decline in the public debt-to-GDP ratio will contribute towards a larger fiscal space and help in increasing confidence in Vietnam's macroeconomic sustainability going forward," stated the report.

The government also has a good control of state budget revenue and spending.

In the first 10 months of this year, total budget revenue hit nearly VND1.14 quadrillion (US$49.6 billion), including VND45 trillion (US$1.95 billion) from crude oil exports, equal to 100.9 per cent of estimates. Meanwhile, total budget expenditure reached VND1.09 trillion (US$47.4 billion), including VND774.9 trillion (US$33.7 billion) in recurrent spending. Thus, the total budget surplus is US$2.95 billion.

Last year, state budget revenue and spending hit US$61.36 billion and US$71 billion, respectively, resulting in a budget deficit of US$9.64 billion or 3.6% of GDP.

Looking ahead, the government is likely to keep the budget deficit in 2019 below the target of 3.6% of GDP, given the relatively satisfactory progress in revenue collection, AMRO said.

However, last week, the NA adopted a resolution on state budget for 2020, with total state budget revenue of over VND1.51 quadrillion (US$65.65 billion), and total state budget expenditure of nearly VND1.75 quadrillion (US$76 billion).

Total budget deficit will be VND234.8 trillion (US$10.35 billion). Of which the central budget deficit will be VND217.8 trillion (US$9.47 billion) or 3.2 per cent of GDP, and the local budget deficit will be VND17 trillion (US$880 million) or 0.24 per cent of GDP.

According to Painchaud, recalibrating fiscal policy would also help support growth. Vietnam should consider a fundamental tax reform to help reduce economic distortions by broadening tax bases and narrowing tax incentives. Vietnam's large social and infrastructure spending needs - to address its sustainable development goals, climate change, population ageing and digitalisation - require the level and efficiency of infrastructure investment to be raised. Clarifying the implementation of the anti-corruption law could help unblock public investment. Ensuring more effective competition in public procurement should be a priority in improving public investment efficiency.

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Vietnam succeeds in controlling public debt

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The government has reported to the National Assembly (NA) that the country's public debt is estimated to be reduced to 56.1% of GDP, from 58.4% of GDP in 2018, and 64.6% in 2016. This means that the public debt has been well controlled, ensuring national financial security, and is far lower than the permissible limit of 65% of GDP set by the legislature.