Inflationary pressure stems from commodity price fluctuations

Unusual fluctuations in the gold market can affect inflation control. Photo: HD

Gradually putting pressures

According to the Ministry of Finance, prices of essential goods are relatively stable in March 2024 because the supply is still quite abundant while demand is not high. Therefore, statistics from the General Statistics Office show that the consumer price index (CPI) in March decreased by 0.23% compared to February. The average CPI in the first quarter of the year increased by 3.77%, and rose 4.18% in the same period in 2023. However, the Ministry of Finance assesses that the domestic and international market situation still fluctuates, which can put pressure on CPI as well as inflation management.

According to experts, inflationary pressure may increase due to the impact of adjusting prices of state-managed goods, implementing wage reform policies, increasing raw material prices... and fluctuations in prices of petroleum products, food, semiconductors, sea and air transportation costs on the world market.

In fact, world commodity prices continuously fluctuate to reach new peaks. According to the Mercantile Exchange of Vietnam (MXV), closing the first trading week of the second quarter of 2024, the prices 10 of 31 products on the market increased by 4%, the prices of important products hit peaks for many months. For example, as of early April, Robusta coffee price soars to over US$3,660/ton, setting a new peak within 30 years. Arabica coffee price rises to about 4,350 US$/ton.

According to MXV, oil prices also record consecutive increases in the first days of April, maintaining the highest peak over the past five months. The reason is that supply shrinks in the context of rising geopolitical risks, pushing WTI oil prices to about 87 US$/barrel, Brent oil prices to over US$91/barrel and heading towards a peak of about US$95 /barrel.

The Ministry of Finance said that although prices in the domestic market are relatively stable, the prices of some products slightly increase such as live pork price due to the impact of African swine fever or the price of Liquefied Petroleum Gas (LGP) due to fluctuation of the world price. However, the rice prices level off and tend to move sideways, and pork prices also maintain a sideways trend...

The domestic petroleum prices have been closely controlled by the Ministry of Industry and Trade and the Ministry of Finance to operate in line with the market situation through 12 price adjustment cycles, so the prices of petroleum products do not see the high fluctuation level. For example, as of early of April, E5RON92 gasoline price is not higher than VND23,916/liter (up VND291/liter compared to the current base price), RON95-III gasoline price is not higher than VND24,801/liter (down VND15/liter compared to the current base price); 0.05S diesel oil is not higher than VND20,988/liter (up VND295/liter compared to the current base price) ...

Notably, gold prices and foreign exchange rates in the domestic surge. As of the trading session on April 8, the buying price of gold rings hit the peak of VND74 million/tael and the selling price at VND over 75 million/ tael.

The USD prices at commercial banks go up. For example, USD prices at Vietcombank are listed around 24,750-25,120 VND/USD (buy - sell), up 2.86% compared to the beginning of the year. Foreign currency prices are forecast to increase due to increased demand for imported raw materials, as well as pressure from excess liquidity in the large banking system in the context of low credit growth.

Creating a stable price level

The Prime Minister and the Government have directed ministries and sectors to implement solutions to stabilize the macroeconomy and major balances of the economy, and control inflation.

Therefore, the Ministry of Finance assigns the Department of Price Management to review, analyze and forecast market prices in April, and monthly update the price management scenario and report to the Ministry’s leaders. Notably, the department needs to monitor developments in world and domestic gasoline prices to periodically report to the Ministry on gasoline price management plans; coordinate with the Ministry of Industry and Trade to adjust gasoline prices in accordance with current regulations.

For other essential goods managed by the State such as healthcare and education, the price adjustment roadmap has been set, so it is expected that the impact on inflation control will be reduced. Notably, Vietnam Education Publishing House announced an adjustment to reduce the selling price of reprinted textbooks for grades 1, 2, 3, 4, 6, 7, 8, 10 and 11; builded the selling price of textbooks for grades 5, 9 and 12 (first year of publication) under the reduced price structure of reprinted textbooks in the 2024-2025 school year.

In a recent document responding to voters related to price adjustment and stabilization, the Ministry of Finance stated that the State respects the right to self-determination and price competition of business production organizations and individuals as per the provisions of law.

The State only indirectly impacts the formation and price movement of the items through macroeconomic measures and uses price stabilization measures when the prices of goods and services subject to price stabilization list have abnormal fluctuations in prices or fluctuations in price level, affecting the socio-economic stability. In addition, the State controls prices under the provisions of law through promoting inspection and examination... contributing to creating a stable price level.