Consumer price index (CPI) slowed down for the second consecutive month, increasing just 0.24 per cent in August against July and 8.31 per cent over the end of last year. The index increased 0.52 per cent on-month in July and 0.55 per cent in June.

However, Hanoi Institute for Socio-Economic Study’s Economic Research Department head Nguyen Minh Phong said the CPI should be tracked further to make sure inflation concerns were eased.

“We need one or two more months to know whether it is going to be a [downward] trend,” said Phong. He said the possible oil price hike in the last months of the year would even increase the pressure on inflation.

Prime Minister Nguyen Tan Dung have also asked the State Bank and the Ministry of Finance to take precautions against high inflation as a sizeable economic stimulus package was is implemented.

The government has adopted a $8 billion stimulus package to boost economic growth, with the bulk of which being pumped into the economy in forms of interest subsidies for bank loans. According to the State Bank, about $22 billion had been disbursed under the interest rate subsidy programme since March 2009.

Meanwhile, the government has planned to disburse $3.5 billion of governmental bonds and about $3 billion of official development assistance this year. Bui Kien Thanh, chairman and chief executive officer of International Asset Management Company, said the amount of money was not small and the question was how effectively it was used.

“We have learned a lesson from ineffective investments in the past that caused high inflation in 2008,” Thanh said. “The problem this time is not how much money we disburse, but how enterprises and people use the subsidised loans,” he said.

Pham Chi Lan, an independent economist, said the money supply in circulation this year was not big enough to push inflation to 2008’s high levels. “This year is different from 2006 and 2007 when we saw huge indirect foreign investments and high credit growth. Now, indirect foreign investments are not flowing into the country so much and annual credit growth has been kept under 30 per cent,” said Lan.

But she agreed that inflation would be a threat to the economy if the stimulus money went in the wrong direction. At a recent meeting of the National Financial Supervisory Council, some members proposed that the government introduce a second short-term interest rate subsidy package as soon as the current package ends in December, sparking new concerns over high inflation due to the additional amount of money injected in circulation.

Le Duc Thuy, chairman of the council, said that a second interest rate subsidy package was essential to help enterprises overcome and recover from the economic slowdown. However, Thuy said high inflation would not necessarily return.