Determine tools, policy for inflation control

Economic expert Associate Professor, PhD. Ngo Tri Long

How do you forecast inflation in the second half of 2024?

According to data from the General Statistics Office, in the first 6 months of 2024, inflation increased by 2.75 percent, while the National Assembly's target of inflation for the whole year 2024 is at 4-4.5 percent. In recent instructions, the Prime Minister has requested economic management and inflation to achieve the highest economic growth and lowest inflation.

With the current situation, many organizations and experts assess that although there is not much room left for inflation in 2024, they all believe that it can be controlled. However, controlling inflation still cannot be subjective or negligent in management.

In your opinion, what factors will affect inflation in the near future?

Many international organizations forecast that world economic growth in 2024 will be lower than in 2023, many factors put pressure on the price level, while prices of raw materials, essential consumer goods and services, such as gasoline prices, are forecast to continue to fluctuate unpredictably. Domestically, inflation may continue to increase due to fluctuations in world supply and prices; due to expected adjustments in electricity prices, education and healthcare services, salary reform policies...

In particular, with monetary policy, the exchange rate is expected to continue to be under pressure to adjust due to external pressure. Rising exchange rates are a matter of concern, especially related to monetary policy management, interest rates, increased prices of goods and services...

What is the solution to the above problems, sir?

Controlling inflation is not just about controlling commodity prices but must be a harmonious whole between policies, the most important of which is monetary policy in which the State Bank plays the leading role. Other financial tools, goods supply... are factors that contribute to inflation control.

The results of the first 6 months of 2024 show that the role of monetary policy is very large, when the world economy has many fluctuations but monetary policy is managed flexibly and cautiously with the priority goal of controlling inflation. Combined with that, there is positive fiscal policy space, contributing to solving difficulties and supporting domestic production, while also creating conditions for monetary policy to cope with external shocks.

Thus, in the last 6 months of the year, it needs solutions to manage the relationship between exchange rates and prices, interest rates and inflation... along with monitoring the financial situation, budget revenues and expenditures to ensure balance. For resources, or for the Industry and Trade sector, we must solve the problem of supply and demand of goods...

In addition, credit policy management also needs to be cautious, ensuring a reasonable balance between promoting economic recovery and ensuring financial stability.

In particular, it is necessary to determine reasonable levels and tools in coordinating policy administration. Because fiscal policy often immediately changes aggregate demand, thereby affecting income and output faster than monetary policy, but there is a delay in implementation effectiveness.

In addition, fiscal policy is a fixed policy, implemented according to the plan approved by the National Assembly, while monetary policy is a flexible policy. So in my opinion, if you make good use of these characteristics, you can create more effective interaction, but deciding on policy options requires practical evaluation and analysis.

Regarding salary increases - price increases, although this is a regular, even inevitable phenomenon, it will be difficult to affect inflation, because the proportion of salaries in the public sector is very low, the market still depends on supply and demand factors. Furthermore, the Government has also prepared resources for a huge salary increase, as well as directed the management and control of market prices to ensure that people enjoy the actual benefits of salary increases.

Therefore, inflation control needs to continue to be improved, such as closely monitoring market developments for each item, especially essential goods and services. In addition, there are very strict and deterrent sanctions for acts of raising goods prices when increasing wages.

Thank you, sir!