Control inflation expectations

Controlling consumer prices helps stabilize people's lives in a difficult context. Photo: HD

Stabilization in psychology and inflation expectations

The Ministry of Finance always emphasizes the need to focus on providing truthful information, publicity and transparency about prices to control inflation expectations; limit  false information that voices concern for consumers and destabilizes the market.

Deputy Director of the Price Management Department (Ministry of Finance) Pham Van Binh, said that it is necessary to focus on creating consensus in public opinion for the Government's price management, and stabilization in psychology and inflation expectations.

According to economist Dr. Nguyen Bich Lam, former Director General of the General Statistics Office, one of the solutions to control inflation is that relevant agencies and the Government need to well implement communication to avoid creating inflation expectations because it can push the price level up at certain times of unfavorable domestic and world economic developments.

In fact, inflation expectations among the people have been occurred, especially in response to information about the growth of wage or price or unusual market developments. For example, when there is information about the increase in electricity prices and gasoline prices, the prices of goods begin to rise.

At National Assembly sessions, many National Assembly delegates also expressed concerns that inflation will rise when the salary will be reformed from July 1, 2024 and revised up 7%/year from 2025 onwards for cadres, civil servants, public employees, and armed forces....

National Assembly Delegate Vu Thi Luu Mai - Deputy Chairwoman of the Finance and Budget Committee (Hanoi Delegation), said that salary increases must go hand in hand with inflation control because in recent years, the salary adjustments for officials, civil servants and public employees cannot keep up with the increase in prices of goods on the market. According to a report from the General Statistics Office, in the first 4 months of the year, 31% of households were affected by rising prices. The delegate said that if the salary increase is not applied in parallel with measures to control inflation, the meaning of the salary increase is not guaranteed.

Recently, the price of gold has surged and recorded the highest level ever, but it is forecasted to continue to increase, creating expectations for people about the rising price of this precious metal. Although the price of gold is not included in the basket used to calculate the consumer price index (CPI), it will also affect other consumer products, especially gold jewellery and fine arts products when it is currently the peak wedding and year-end shopping season.

Executing in line with roadmap and price transparency

According the General Statistics Office, CPI in November rose 3.46% month-on-month and 3.45% year-on-year. On average, in the 11 months of 2023, CPI increased by 3.22% over the same period last year; and core inflation went up 4.27%. In the 0.25% increase in CPI in November, there were 8 groups of goods and services with increased price indexes, 2 goods groups with decreased price indexes. Among them, the prices of the group of medicine and medical services soared 2.9% due to that some localities have applied new medical service prices.

According to the assessment of the General Statistics Office, the CPI growth in the first months of 2023 tends to gradually decrease compared to the same period last year, and increase again in July and decline in October. The year-on-year decrease of 12.12% in the average domestic petroleum price in the 11 months of 2023, and of 7.5% in the gas price are factors to restrain the growth rate of CPI, but they belong to the group of goods excluded from the list of core inflation calculations.

To control inflation in the remaining months of 2023 and in 2024, Prof.Dr. Hoang Van Cuong, Vice President of the National Economics University, said that Vietnam's inflation will be hit hard by world inflation, but thanks to the use of financial tools combined with flexible currency policies, so the inflation is well curbed. Therefore, in the future we need to use this tool more flexibly. Prof.Dr. Hoang Van Cuong also stated that the VAT reduction or application of tax and fee support policies will not only help stimulate consumption and promote the manufacturing enterprise sector but also support the market on price.

However, experts also recommend on inflation expectations in 2024, the price adjustments of some essential goods such as educational services, medical services... or unpredictable developments in prices of food, raw materials will affect the psychology of manufacturers and consumers, thereby pushing market prices to adverse developments. Therefore, many opinions suggest that State-determined goods and public services that are implementing a price adjustment roadmap need to be adjusted at the appropriate time. At the same time, management agencies need to strengthen control of transparency in price listing and price adjustment.