Banks fail to meet credit targets

HA NOI (VNS)— The goal set for credit growth this year was proving hard to reach and banks should shift focus to credit quality, said Pham Hong Hai, managing director, head of Global Banking and Markets HSBC Bank Viet Nam.

Accelerating credit quality was critical for banks to develop, Hai said. He told Thoi Bao Ngan Hang (Banking Times) newspaper that banks should select customers to provide loans, rather than promote credit growth at any cost which had caused bad debts to increase.

Hai said high interest rates were not responsible for low credit growth. Lowering rates would not improve credit growth because low domestic demand was holding back the growth of companies and the need to borrow. In addition, if the bank interest rates were lowered to 8-7 per cent while inflation was rising, Viet Nam dong would be withdrawn to be invested in foreign currencies or gold.

The credit growth target this year of 8-10 per cent would not be fulfilled, he said, forecasting a rate of 6-8 per cent.

“However, it is not a worrying situation,” he said.

Nguyen Xuan Thanh, public policy manager at the Fulbright Economics Teaching Programme, said slow credit growth after years of boom was inevitable when the banking system struck difficulties, as had occurred in other Southeast Asian countries. “The economy is regulating itself,” he said.

Meanwhile, Trinh Van Tuan, chairman of the Orient Commercial Bank, said bank liquidity should be prioritised.

Investment in Government bonds was the safest choice for both liquidity and profit, although the profit would not be high, Tuan said.

Deputy general director of the Viet Nam International Bank Le Quang Trung said State Treasury had mobilised Government bonds worth VND147.46 trillion (US$7.022 billion) since the beginning of the year, 95 per cent of which were from commercial banks. — VNS

Foreign investors keep wait-and-see attitude

HCMC – A well-known foreign fund manager asserted on Thursday that foreign investors were not investing in Vietnam’s equity market now and would maintain a wait-and-see attitude until the macro economy stabilized next year as expected.

Don Lam, chief executive officer of VinaCapital, said at the foreign fund manager’s annual meeting in HCMC on Thursday that “investors will pour funds into Vietnam next year provided that the macroeconomic stability is achieved.” He, however, said that investors still showed keen interest in Vietnam.

Vietnam’s economy is less appealing to investors now due to its slower economic growth, increasing bad debt, and a banking sector in need of restructuring, so foreign investors expect that next year would be a better time, VinaCapital said.

The bright spot in Vietnam is that the price-earning ratio in the local equity market is fairly low compared to other regional markets, attracting investors’ attention, Don Lam said. Vietnam’s P/E ratio as of end-August was 9.9 compared to 12.8 in Thailand, 14.6 in the Philippines, and 14.8 in Malaysia.

VinaCapital currently manages four investment funds, including three major funds namely VinaCapital Vietnam Opportunity Fund (VOF), VinaLand Ltd, and Vietnam Infrastructure Ltd. Except the last-named fund that invests in infrastructure, the other two are faring pretty well.

Andy Ho, managing director of VinaCapital and head of investment at the company, said the infrastructure fund’s assets have shrunk as the stock market has declined over the past years. This fund has invested over US$350 million in Vietnam, but its value has now fallen to over US$200 million.

VinaCapital is now trying to divest investments from problematic projects to pay back to investors.

Andy Ho said this fund was the worst performer among those managed by VinaCapital. Still, the company was seeking to increase the fund’s net assets value by 30% by acquiring blue-chips as well as other stocks with low P/E ratios.

Meanwhile, VOF had its net assets value as of September 30 at US$725.3 million, increasing by nearly 150% compared to 2003 when the fund was established.

VOF has a wide portfolio under its management, including bonds, debts of listed and public firms, and investments in private enterprises. In the coming time, VOF will continue acquiring stocks, especially low-priced securities with high potential, Andy Ho said.

Meanwhile, for the fund VinaLand Ltd. that invests in real estate, Don Lam said it would continue investments into existing property projects, not fresh ones. The fund as of September 30 had net assets value of US$540 million, with investments in 36 projects ranging from hotels and resorts to trade centers, housing and urban complexes.

The two-day VinaCapital investment conference wrapped up on Thursday, with 75 investors taking part, up from 50 at last year’s event.


By Thanh Thuong – The Saigon Times Daily

Vietnam CFO Forum 2012 themed “Financial Restructuring to Overcome the Crisis”

Hochiminh city, Vietnam – On October 17, 2012, Vietnam Chief Financial Officers (VCFO) in cooperation with Japan Association for CFOs (JACFO), and ACCA will host the Vietnam CFO Forum 2012 themed “Financial Restructuring to Overcome the Crisis” at New World Hotel.

The event will rally more than 200 representatives of the International Association of Financial Executive Institute (IAFEI), VCFO, JACFO, and ACCA members, as well as representatives from international and domestic financial associations, chief esxecutive officers, chief financial officers, and financial leaders.

Vietnam CFO Forum 2012 is an annual financial forum for financial communities, held as part of a series of the International Association Financial Executives Institutes (IAFEI) activities to promote the sharing of local and international experiences, skills, knowledge and information in the field of corporate finance governance. IAFEI is a prestige institution with 19 CFO association members and more than 16,000 individual members.

The Vietnam CFO Forum 2012 focuses on financial restructuring, a top issue of concern of many enterprises. Given the context of economic difficulties, enterprises are suffering from huge losses, heavy debts and facing apparent threat of loss of liquidity. Corporate restructuring turns out to be a necessary process, and financial restructuring is considered a productive solution to help enterprises eliminate financial problems, improve business liquidity, and reestablish a strong capital structure to finance for future growth. Financial restructuring is also at the core of the whole restructuring process of an enterprise.

The Forum will give participants an overview of Asia and Vietnam’s economic outlook in 2013 and new expectations on the roles of CFOs in the new age. Experts will share their practical experiences on surviving the crisis by ensuring a healthy cash flow, and ways to approach potential lenders, investors or acquirers seeking to expand in Asia to finance for future growth of enterprises. Also at the Forum, financial experts will provide specific recommendations on applying appropriate financial tools so that enterprises could successfully carry out their financial restructuring process.

ANZ Bank (Vietnam) Ltd.


Ground Floor, 10th Floor, 11th Floor, Kumho Asiana Plaza
39 Le Duan Boulevard
Ho Chi Minh City
Phone: +84 8 3827 2926
Fax: +84 8 3822 3449


Today, ANZ has ten branches in Vietnam and offers a full range of international banking services across institutional and corporate banking, financial markets, trade finance, commercial banking and retail and wealth banking. ANZ also offers customers the convenience of ATMs and mobile bankers. ANZ Signature Priority Banking, a personalized banking service for affluent customers, is also available.

Our awards

  • “Excellence in Best Mortgage Business” in Asia by The Asian Banker 2010
  • “2010 Best Deal in Vietnam” by The Asset Triplpe A Country Award
  • “Top Trade Service Award” in 2009 and 2010 by the Ministry Commerce
  • “2009 VND Bond House of the Year” by Euroweek Asia
  • “Saigon Times FDI Top 40 – Green Values 2009” for environment protection activities
  • “Best Retail Bank in Vietnam” awarded by The Asian Banker in 2008 & 2009
  • “Best Customers Oriented Bank” by Vietnam Economic Times for 9 consecutive years from 2002 to 2010
  • “Best Service Bank 2007” voted by readers of Saigon Tiep Thi Magazine


Australia and New Zealand Banking Group Limited (ANZ) was established more than 175 years ago and today is one of the 25 largest banks globally by market capitalization.

ANZ was among the first international banks to operate in Vietnam after establishing its first office in 1993 with branches in Hanoi, Ho Chi Minh City and a representative office in Can Tho.

In 2008, ANZ Vietnam was granted a 100% foreign-owned banking license by the State Bank of Vietnam. It marked a milestone for ANZ’s expansion strategy in Vietnam and led to the opening of more branches and representative points in Hanoi and HCMC in 2009.


Deutsche Bank AG, Vietnam

Industry: Banking, Finance, and Insurance (NAICS 522, 523, 524, 525)


13th & 14th Floor, Saigon Centre
65 Le Loi Boulevard, District 1
Ho Chi Minh City
Phone: +84 8 6299 9000
Fax: +84 8 3825 8137


Deutsche Bank, founded in 1870, is a leading global investment bank with a strong and profitable franchise. With more than 101,690 employees and 3,092 branches, Deutsche Bank operates in over 73 countries and offers unparalleled financial services in all major financial centers throughout the world where it offers the full range of sophisticated banking services and maintains its superior capital and financial strengths. In 2011, Deutsche Bank was named “Bank of the Year” by IFR, “Best Global Bank of the Year” by Euromoney and “Derivatives House of the Year” by Risk Magazine as well as “Interest Rate Derivatives House of the Year” in the magazine’s 2011 Global Derivatives Awards. Deutsche Bank has also named “Best Insurance Asset Manager” by Reactions magazine.


Deutsche Bank established in 1992 a presence in Vietnam, one of 17 countries in Asia Pacific, and has been operating a full-service branch in Ho Chi Minh City since 1995 and a Representative Office in Hanoi since 2007. DB Vietnam delivers best in class services and clients will benefit from our industry-leading expertise in the global market. Employing approximately 100 staff, the franchise has grown from pure commercial banking into a multi-faced investment banking operation.

Hanoi Representative Office
Suite 503, 5th Floor
63 Ly Thai To Street
Hoan Kiem District, Hanoi, Vietnam
Tel: +84 4 3 936 7255
Fax: +84 4 3 936 7254


Mr. Torsten Kessler, Head of Multinational Corporates – Vietnam

Ms. Hong P.N. Le, Head of Trade Finance/Cash Management Coverage

Mr. Tri N. Pham, Chief Country Officer Vietnam & General Manager

Ms. Ngoc Trieu, Chief Representative Hanoi Office / Head of Corporate Banking Coverage Vietnam

MA Financial and Managerial Accounting

In a technical sense, accounting provides a conceptual framework for preparing financial statements and accounts. The issues which arise in accounting are related to the difficulty of establishing a true and fair value of an enterprise and its assets, the moral basis of disclosure and discretion and the standards and laws required to satisfy the political needs of investors, employees, suppliers and other stakeholders in taking decisions broadly related to the economy. In this sense, accounting is a concept – and yet it is more than this. It is also a decisive part of a mechanism and a crucially important instrument in establishing and maintaining a market-based transaction system.

Accounting measures the heartbeat of the economy !

The Master in Financial and Managerial Accounting (MA FAMA) takes an international approach to combining theory and practice in providing broad business administration skills focused on international financial reporting standards as well as on managerial accounting.

It concentrates on the role of information in a market economy, and especially its importance in developing sound financial systems. To achieve the goal of skills and expertise on the level of the individual stakeholder, the FAMA Masters Programme curriculum and content not only provides core knowledge on external and internal information systems, but also addresses some key integrative multi-disciplinary aspects. In addition, the programme includes a broad selection of electives on various aspects of management, ethics, law and politics to meet the specific knowledge needs beyond pure accounting.

In line with the developing cooperation between the Federal Republic of Germany and the Socialist Republic of Vietnam the programme is jointly offered by the IMB Institute of Management Berlin and two Vietnamese universities as :

“Study in Vietnam – Obtain a Master Degree from a German University”


Study Location

The Master in Financial and Managerial Accounting can either be studied at the Banking Academy of Vietnam in Hanoi or at the Ho Chi Min City Open University.

Banking Academy of Vietnam (BAV)

The BAV, established in 1961 in Hanoi, is a state university, governed by the State Bank of Vietnam and the Ministry of Education and Training.

At present, over 20,000 students at all levels can study five training majors, from Banking and Finance to Accounting, Business Administration, Economic Information Systems, and English.

Ho Chi Min City Open University (HCMCOU)

The HCMCOU was founded in 1990 to offer a broad programme of continuing education. To respond to diverse learning needs, it provides a variety of programmes from undergraduate to postgraduate, ranging from on-site to distance learning or learning at satellite academic centres. HCMCOU runs a number of joint Master Programmes with renowned foreign universities.


Study Structure

The Master programme is basically divided into two parts:

  • 1st study term (11 months): Foundation Course
  • 2nd study term (13 months): Specialisation and Master’s Thesis

The Foundation Course enables students to extend their knowledge acquired during their undergraduate studies to develop further expertise in Financial and Managerial Accounting and related subjects.
In addition, a range of additional courses are provided by the electives and tutorials.

The specialisation builds on the Foundation Course to provide the specialised skills to meet the challenges in the chosen career sector. A case study / research project enables students to apply their new theoretical knowledge in practice. In addition to the completion of the specialisation modules, this study term is scheduled for completing the degree by submitting the Master’s Thesis and defending it in an oral exam.


The MA Financial and Managerial Accounting offers a wide range of thematic focuses.

First Academic Year First Academic Year
Advanced Financial Accounting
Advanced Managerial Accounting
International Corporate Finance
Data Analysis in an Accounting Context
Elective, e.g.
Business Process Management
Information Regulation and Supervision
Value Based Management
Political Economy of Modern Capitalism
Global Governance
Development Economics
Institutional Economics
Financial Risk Management
IT applications in Accounting
Tutorial I + II
Second academic year
Special Issues of Financial Accounting
Special Issues of Management Accounting
Case Study / Research Project
Research Methodology Seminar
Master’s Thesis
Oral Assessment


On successful completion of the MA programme the internationally recognised degree Master of Arts (MA) will be awarded by the IMB Institute of Management Berlin at the Berlin School of Economics and Law.

The tuition fees for the programme is 8,000 US Dollars. The fees are to be paid in two instalments.

The fees include:

  • All courses
  • Teaching materials (books in main subjects and readers/handouts in all courses)
  • Guest lectures
  • Master events
  • Matriculation, exam and final exam fees, service and administration costs

The fees can either be paid as a lump sum or in two instalments:
4,500 USD within 10 working days of admission to the programme
3,500 USD within 5 working days of the start of the second study year.

Admission Requirements

  • A first degree in Business or Economics (minimum of 180 credit points or a four-year Bachelor).
  • Applicants with a Bachelor in Social Sciences, Economics and Law may be admitted if they can demonstrate substantial practical experience and a solid academic basis in accounting.
  • Students with other foreign Bachelor degrees may be admitted if they are entitled to study on a Master Programme at the Vietnamese Partner University and meet all other admission requirements
  • Evidence of having successfully completed undergraduate courses in Financial Accounting and/or Managerial Accounting
  • Good English language skills equivalent to a TOEFL certificate of at least ibt 64 points, cbt 180 points, IELTS ( overall band score 5.5 or other equivalent certificates
  • Letter of motivation with Curriculum Vitae in English
  • One year of relevant professional experience preferably in close context with one of the major subjects of the study programme
  • Successfully passed application interview

Based on the recommendations of the Vietnamese partners, the final decision on admissions is taken by the IMB admission committee.


Please submit your application form together with:

  • Curriculum Vitae/Resume
  • Motivation letter with statement of professional goals and plans relating to specific aspects of Financial and Managerial Accounting
  • Graduation Certificate and Transcript / Academic Record of Bachelor curriculum
  • Certificate / letter stating your overall average grade (if not included in your graduation certificate)
  • Proof of English proficiency (TOEFL, IELTS or equivalent)
  • References indicating the type and duration of your work experience, and its relevance to the subject
  • Copy of your passport


Application Period

Applications can be submitted at any time until 15 September for the programme starting in December.

All applicants have to send one complete application to the chosen Vietnamese university:

Banking Academy of Vietnam
Nguyen Thi Hoai Thu, MBA
International Training and Cooperation Centre
Head Office Building
12 Chua Boc Street
District Dong Da
Hanoi, Vietnam


Ho Chi Minh City Open University
Dr. Nguyen Minh Ha
Head of Graduate School
Acting Head of Personnel Office
97 Vo Van Tan Street
District 03
Ho Chi Minh City, Vietnam
E-Mail: or

Short listed candidates will be invited to an interview conducted at the university where they have applied for the programme.

Health-care Decisions on Hold

Finance executives waited anxiously this past summer for the Supreme Court’s ruling on the Affordable Care Act (ACA). But months after the law was ruled constitutional, uncertainty still reigns. Companies are still trying to figure what the costs of complying with the ACA will be. Some are studying whether it makes sense to discontinue health benefits and instead pay a penalty. Many smaller companies still don’t know that they qualify for health-care-related tax breaks.

The law’s “employer shared responsibility” provisions, scheduled to take effect in 2014, include a penalty for companies that do not provide “minimum essential coverage,” to be collected via corporate tax returns. A “large” employer, generally defined in the law as having more than 50 employees, is subject to the penalty if even one full-time employee qualifies for “premium assistance tax credit” (designed to help low- and middle-income individuals and families purchase health insurance). In most cases, the penalty will be $2,000 per year per full-time employee.

The Internal Revenue Service tried to assuage some concerns over shared responsibility earlier this month by issuing a safe-harbor notice that should help employers figure out which workers are deemed full-time, and thereby help some to avoid the shared responsibility penalty. Along with the Health and Human Services Department and the Labor Department, the IRS also recently provided guidance about the ACA-mandated maximum 90-day waiting period between new employees’ start date and when their health benefits kick in, also to take effect in 2014. Many employers currently use a longer waiting period, often six months.

Some observers say more clarity is still needed, however. The general air ofuncertainty around the ACAis provoking much discussion among companies’ executives these days, says Shawn Nowicki, director of health policy for New York Business Group on Health, an employer-based business coalition with a subsidiary that offers a health-insurance exchange. Until fairly recently, most discussions about a company response to the ACA took place at the human-resources level, but now CFOs and their key reports are getting more involved, he notes.

Still, the higher level of discussion has not generated much action, according to Nowicki. Many corporate executives are waiting to see whether their competitors will abandon health care and pay the penalty, he notes. From a purely financial standpoint, doing so would be a wise choice for most employers that offer health benefits, because their per-employee health-care costs are typically several times greater than $2,000 per year, often $10,000 to $15,000. Standing in the way, though, are recruiting and retention concerns.

Some companies, Nowicki says, plan to structure employee contributions so that low-wage workers would be better off receiving the premium subsidy the federal government will offer for purchasing insurance through the planned state insurance exchanges, which under the ACA must be operational by 2014.

A two-tiered approach could develop, he says, in which a company could offer an employer-sponsored plan to certain employees while those ineligible would be sent to the exchanges. The company would still be subject to the penalty, but the math could work out to where “they feel comfortable with this arrangement,” he adds.

It is generally believed that many states are unlikely to meet the 2014 time line for exchanges to be operational, but some states are well along the path to meeting the deadline. Among the most advanced is Connecticut, which created its exchange in 2011 and is moving closer to implementation. Other leaders include Maryland, Nevada, Rhode Island, Vermont, and Washington.

Aside from just health-care-exchange decisions, companies will have to take a look at all facets of their operations because of the ACA, noted Les Funtleyder, president of Poliwogg Investment Advisors and author of Health Care InvestingProfiting from the New World of Pharma, Biotech, and Health Care Services (McGraw-Hill, 2008), at a New York State Society of CPAs (NYSSCPA) briefing last week.

Pharmaceutical firms, for example, will likely be less dependent on size and scale and more so on innovation in their business lines, noted Funtleyder. That’s because the costs of ACA compliance, he said, will force them to be more competitive.

Other industries will take some direct hits. Medical-device firms, for one, will be hit hard by an ACA provision called the Medical Device Excise Tax. Device manufacturers and importers will have to pay the new tax on their sales starting in 2013.

Small and midsize companies in all industries, though, can still benefit from the Small Business Health Care Tax Credit, a 35% maximum credit on health-care spending by certain small businesses and 25% for tax-exempt employers.

But companies are relatively unaware that the credit is available, noted Charles Bell, programs director for Consumers Union, the nonprofit publisher ofConsumer Reports magazine, at the NYSSCPA briefing. The cost of that oversight will rise at the start of 2014, when the credits extend to 50% and 35%, respectively.

UK trade deficit narrows in July as oil exports rise

The UK’s trade deficit narrowed in July, led by an increase in oil exports to the European Union.

The deficit in July totalled £1.5bn, compared with £4.3bn in June, the official figures showed.

Exports of goods rose 9% to £25.8bn, while imports shed 2.1% to £32.9bn. For services, exports fell 0.9% to £15.6bn, while imports declined 0.4% to £10bn.

Commerzbank economist Peter Dixon said July’s figures were better than expected.

The Office for National Statistics said that in addition to higher oil sales to Europe, exports were lifted by a rise in the sale of chemicals and consumer goods to non-European Union countries.

Mr Dixon said: “The numbers are better than expected after June was worse than expected. If you look at them on balance, the export figures are back to where they were in May.

“I wouldn’t expect further such small deficits in the future. UK trade will continue to struggle in the face of the problems in the eurozone.”

The UK has been in recession since the last quarter of 2012, with the most recent data showing that the economy contracted by 0.5% in April to June of this year.

EVN to increase power prices to offset losses

HANOI – Vietnam Electricity (EVN) will make up for its losses resulting from electricity trading and exchange rate discrepancies by hiking power prices from now until 2015, said EVN deputy general director Dinh Quang Tri.

Speaking last Friday to further explain the issues related to the power business, Tri said EVN had borrowed US$7.4 billion loans to invest in power projects in 2010 and 2011. The loans guaranteed by the Government brought EVN a loss of VND26 trillion as of the year-end because of exchange rate volatility.

In addition, the State-run group suffered a total loss of VND11 trillion in the last two years as it had to buy electricity at high prices and mobilized power sources fueled by diesel and fuel oil due to drought and power shortfall.

Tri informed EVN had reported to the Prime Minister on its exchange rate loss in 2010 and 2011.

The Government has permitted EVN to factor the losses caused by the fall of the Vietnamese dong currency against the U.S. dollar into its account over four years starting 2012. “Otherwise, the Government could not get money to repay the loans it has guaranteed,” Tri noted.

He ascribed the losses on power trading and forex rate differences to objective factors. “They will certainly be covered by power prices,” he stated, adding it is indispensable.

Other groups and corporations like PVN or Vinaconex do not enjoy loss offset because they are operating in accordance with market prices, but EVN is not. “This is policy losses, consumers must bear,” he reiterated.

He added that from now to the year-end, even though forex rates remained stable, EVN would consider including a portion of its losses in power prices, meaning it would increase power prices. “The specific increase level has not been calculated.”

The Government’s regulations allow EVN to increase power prices every three months, but it has to seek permission of the Government and relevant ministries before any price hike, said Tri.

The EVN leader said that although weather conditions are favorable and cheap power sources are mobilized, EVN cannot cut prices because it has to cover its losses.

Regarding the investment in non-core business sectors, Tri informed EVN would have to divest VND1.1 trillion from stock, banking, real estate and insurance sectors.

Specifically, EVN’s VND757 billion stake in ABBank may be transferred to Geleximco, after its proposal to transfer the shareholding to HDBank was turned down by the central bank.

Tri said ABBank’s share values are now very low, roughly VND7,000-7,200 each, but the partner offers to buy at VND10,000 per share, higher than the current market prices. Nevertheless, the final decision will be made by the Prime Minister.

In the field of insurance, EVN thought it would gain huge profits when selling its 22.5% stake, worth VND125 billion, in Global Insurance Company (GIC). Tri said this business is doing well, and the German partner is seeking to buy more shares to increase its stake to over 20%.

“We are negotiating prices, with the proposed buying price being VND40,000 per share, versus the original price of VND10,000, so EVN would enjoy high profits,” said Tri.

The problem is the regulations of the Ministry of Finance do not allow foreign entities to hold more than 20% stakes. Therefore, EVN is seeking approval for this so that it could divest its capital.

Tri said EVN had invested a total of VND103 billion in real estate, via EVN Land Central and EVN Land Saigon. EVN Land Central will sell its entire land to repay shareholders, and EVN expects to earn huge profits.

Only the group’s capital contribution to An Binh Securities Company is difficult to divest due to drastic market decline, said Tri.

CPI posts negative growth for second month

HCMC – The national consumer price index (CPI) is down an estimated 0.29% month-on-month in July, marking a second consecutive month of negative CPI growth and sparking concerns over deflation.

According to the General Statistics Office, four out of the 11 groups of items used for CPI calculation have seen their prices falling this month, while others have marked up slightly. Price drops in several groups of items, including the most-weighted group, food and catering services, have pushed the CPI down further.

Particularly, food and catering services have dipped 0.47% versus June, with food and foodstuff down 1.49% and 0.45% respectively. Food catering services, however, have picked up 0.51%.

The group of housing, power, water, gas and building materials has recorded a month-on-month decline of 0.93% although power prices were hiked on July 1 and water prices in some localities are now calculated in accordance with the new price frame issued by the Ministry of Finance on July 11.

Given the fuel price cut on June 21, transport prices lost 2.71% against June. The fuel price increase on July 20 is not factored in this month’s CPI as the time for collecting CPI data was over then.

The post and telecommunications group has continued the price decline trend by going down 0.3% this month.

Among the commodity groups with price rises in July, medicines and healthcare services have posted the strongest growth of 3.36%. The remaining groups, namely garment and footwear; household utensils and appliances; education; culture, entertainment and tourism; and other goods and services, have risen a slight 0.46%, 0.4%, 0.11%, 0.22% and 0.4% respectively.

Overall, as of this July, the CPI has edged up 2.22% against December 2011 and 5.35% year-on-year. These are both low figures, consistent with the inflation target of the Government.

However, the negative CPI growth reflects the severely weakening consumption, meaning consumers are doing serious tightening.

For instance, at this time in the previous years, when the weather is hot and the new school year is about to begin, the demand for uniforms and footwear often surges, pushing up prices in this commodity group. Still, prices of garments and footwear have inched up a mere 0.46%.

This is also the group of items with a high volume of unsold products, so producers and distributors have launched various promotion programs and offered massive discounts. These solutions, however, have yet to be as successful as hoped.

Representatives of many garment and footwear firms told the Daily that they had never witnessed such a high level of inventory like this before, which exerts great financial pressure on their business.

Experts said risk of deflation is looming large and there must be timely measures to encourage consumers to spend.

Speaking to the Daily, economist Vu Dinh Anh said deflation occurs when CPI growth stays negative for at least one quarter. Despite the negative indices in two consecutive months now, he forecast CPI would not plunge below zero in the coming months if consumption rose again and prices of power, water, medicines and healthcare services were revised up further.

Therefore, it is now important to improve consumer demand to prevent a further economic downturn and production stagnation, Anh said.

The General Statistics Office remarked CPI has gone down 0.36% in urban areas, versus 0.24% in rural areas. All localities have reported CPI declines this month.