Growth and inflation are like 'twins', be careful of potential risks

The current time is "sprinting" to achieve growth targets, but at the same time must still ensure long-term orientations for the economy.

Professor, Dr. Hoang Van Cuong, Member of the Prime Minister's Policy Advisory Council, Member of the National Assembly's Economic and Financial Committee - Photo: HT

It is impossible to expect strong growth with zero inflation.

Professor Dr. Hoang Van Cuong, member of the Prime Minister's Policy Advisory Council, member of the National Assembly 's Economic and Financial Committee, said the above at the 3rd Vietnam Economic Forum - 2025 with the theme: "What is the driving force for GDP growth of 8.3% - 8.5%", organized by Nguoi Lao Dong newspaper today, September 26.

According to Professor Cuong, the growth target of 8% this year, moving towards maintaining double-digit growth in the following years, is the inevitable path if Vietnam wants to become a high-income country and overcome the middle-income trap.

International experience shows that every country has to go through a period of high growth, approaching double digits for a long time, and we are no exception.

"Growth and inflation are like "twin brothers". It is impossible to expect an economy to grow strongly with zero inflation. The problem lies in controlling inflation at a reasonable level.

In the first 8 months of 2025, inflation was at 3.2%, and is forecast to be below 5% for the whole year. However, risks still lurk when money supply increases sharply, with credit in 8 months 1.4 times higher than the same period last year, while cash turnover is only 0.6%.

That raises the question: where is the money flowing? If it does not go into production, the risk of inflation or the formation of "blood clots" in the economy is real," Mr. Cuong said.

Mr. Dinh Duc Quang, Director of Currency Trading - UOB Bank Vietnam - Photo: HT

Dr. Can Van Luc said that to promote economic growth in the last months of the year, it is important to focus on strongly exploiting new driving forces.

"In my opinion, the growth target of 8.3-8.5% is feasible, but we also need to prepare for a lower scenario, around 8%.

We must maintain the export front, not only of goods but also of services, and at the same time have a timely support mechanism for businesses negatively affected by tariff policies. Policy coordination needs to ensure harmony, both maintaining growth targets and maintaining macroeconomic stability," Dr. Can Van Luc emphasized.

Inflation expectations are very worrying

Professor Cuong also noted that to achieve high growth, we must keep interest rates low to encourage investment, but this puts pressure on the exchange rate.

Exchange rate fluctuations have recently revealed this trade-off. The State Bank has used forward foreign currency sales and has achieved certain results. The Fed's 0.25% interest rate cut has caused the USD to depreciate, temporarily stabilizing the exchange rate.

Another aspect is inflation expectations. When businesses and suppliers anticipate rising costs, they tend to raise their prices early, putting pressure on the market. To break this “expectation barrier”, we need specific support policies.

"In my opinion, fiscal and monetary policies must be coordinated flexibly and proactively to minimize the impact of external fluctuations.

Although the USD has weakened thanks to the US Federal Reserve (Fed) lowering interest rates, pressure remains due to increased import demand at the end of the year to serve the shopping season, while exports to the US are at risk of decreasing due to the reciprocal tax policy. Therefore, I think that stabilizing the flexible exchange rate is the key task in macroeconomic management from now until the end of the year," Professor Hoang Van Cuong emphasized.

There is little chance of further interest rate cuts by the end of the year.

Mr. Dinh Duc Quang, Director of the currency trading division - UOB Bank Vietnam, commented that the opportunity for interest rates to decrease more sharply at the end of this year is very difficult. Because interest rates cannot be adjusted individually, but must be placed in a comprehensive way, ensuring the harmony of interests between borrowers and depositors. Therefore, bringing interest rates down to a lower level in the current context is not easy.

According to UOB's forecast, the Fed will continue to cut interest rates twice more in October and December this year, bringing the US interest rate level to 3.75%.

In 2026, the Fed may continue to lower interest rates two more times, bringing the interest rate level below 3.5%. This will be a favorable basis for the State Bank of Vietnam to consider cutting VND interest rates.

"Regarding the USD/VND exchange rate, many businesses are concerned as the exchange rate has increased by about 3.4% since the beginning of the year. However, we need to look more broadly at the long-term developments. In the past 5 years, the annual exchange rate fluctuations have not been too large. Therefore, it is unlikely that interest rates will decrease further while the exchange rate is still under pressure," said Mr. Quang.

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Source: https://tuoitre.vn/tang-truong-va-lam-phat-giong-hai-anh-em-sinh-doi-can-than-nguy-co-tiem-an-20250926203951277.htm