Pressure from inflation control

The people's "pockets" is being saddled with the sharp increase of many goods. Photo: T.D

Prices tend to increase

According to the General Statistics Office, the Consumer Price Index (CPI) in May 2022 increased by 0.38% on the previous month, by 2.48% compared to December 2021, and by 2.86% over the same period last year. Notably, among the 11 main groups of consumer goods and services, 10 groups of goods increased in price compared to the previous month, only one group decreased.

It can be easily seen that the price increase of domestic gasoline is following world prices; the increase in the price of food, foodstuffs, and the price of essential consumer goods and services which is in line with the price of input materials are the main reasons for the increase in the CPI.

As observed by a reporter, the price level of basic commodities such as food and service prices are skyrocketing. At a restaurant in Hoang Mai district (Hanoi), from the middle of May, there was a sign of a price increase of about 20% per dish. According to Mr. Vu Viet (restaurant owner), he knew that if he increased the price, he would take risk of losing a number of customers. In the situation that the prices of vegetables, meat as well as spices, salt, and fish sauce have increased. If he did not increase the price, he would inevitably suffer a loss.

As for consumers, the fact that the price of most items is increasing has become an obsession. Mrs. Thuy Ngoc (Cau Giay, Hanoi) is a public servant with an average monthly income of less than VND10 million. Ngoc shared that, with this salary, if she spent like before, her family's spending fund would be "overburdened" due to escalating prices.

"This fact makes my family have to find ways to cut spending, find more "left-hand" jobs to have more income," Ngoc said.

Focusing on the core solution

Rising CPI is creating concerns about inflation control. According to Minister of Finance Ho Duc Phoc at the question-and-answer session on financial issues on June 8 in the hall of the 3rd session of the 15th National Assembly, the inflation in the US is currently at 8.3%, inflation in Europe is 8%, Singapore is 5.4%, South Korea is 4.8% and Thailand is also 4.6%.

Meanwhile, the inflation index in our country is currently is 2.25% (the target set by the National Assembly for the whole year 2022 is less than 4%). Although this is a quite positive number in the current context, there will also be many challenges and difficulties.

Vietnam's economic annual report 2022, conducted by a group of authors from the Institute for Economic and Policy Research (VEPR), forecasted that Vietnam's inflation in 2022 was expected to be in the range of 4 to 4.5%. VEPR presented a series of strong impact factors from the supply chain such as supply shortage, sudden increase in aggregate demand; labor shortage; petrol prices, and electricity prices are forecasted to increase due to increased production and consumption demand in the future, while food prices increase in line with world prices due to supply chain disruptions; consumer demand at the end of the year increased and region's minimum wage increased.

However, the report also said that policies on reducing taxes, fees and charges have helped reduce pressure on the price level. In particular, the flexible exchange rate policy, keeping the VND relatively stable once again helped reduce import pressure on inflation.

Moreover, talking about inflation, Minister of Finance Ho Duc Phoc said that, besides the objective factors that are having a negative impact on inflation control, it was fortunate that our country had self-control over food and food products - items account for 40% of total goods. This is a golden time for our country to make a breakthrough in the development of domestic production and consumption. If the country takes advantage of this opportunity to create and develop, we would surely turn up because the inflation pressure in other countries was very high.

Many experts recommended that, in order to control inflation, the most important thing was that monetary policy needed to maintain a status of "adaptation" to the current state of the economy, continuing to balance between inflation and financial risks with support for economic recovery, clearing the capital flow. In addition, it is necessary to continue promoting the development of the bond and stock market, but it needs to publicize information and transactions and promote the professionalism of market participants. At the same time, it is necessary to manage inflation expectations as well, prepare contingency measures and act quickly if the risks of expected inflation gradually increase. Furthermore, clearly communicate the scenario, roadmap, and action conditions to the public, ensuring not to forget the goal of maintaining price stability and protecting the reputation of the State Bank's policies.

In the coming time, the Ministry of Finance will continue to control core inflation in 2022 to create a basis for general inflation control; continue to closely monitor the world economic situation and inflation, price movements of fuels and strategic materials, and step up the work of synthesis, analysis, forecast, develop in advance the scenarios and response plans for each item in the event that goods on the world market continue to increase, to manage domestic production, balance and control supply and demand, and stabilize prices appropriately.

Another important solution highlighted by the Minister of Finance is to promote the development of enterprises, promote the development of business households and ensure social security, restructure the economy, and make breakthroughs in infrastructure and digital transformation. According to Minister Ho Duc Phoc, the core of the economy is not only fiscal and monetary policies, as those policies must be directed at businesses and people. People and businesses operate their business effectively, have incomes, increase GDP, increase budget payments, create jobs and improve their lives, it will help maintain the fiscal and monetary policy, including stock market policy.

“Therefore, it is necessary to prepare all the best conditions for administrative procedures as well as digital transformation infrastructure and scientific and technical advances for businesses and people to produce and operate the business effectively. This is the fundamental solution to fight inflation in the best way," Minister Ho Duc Phoc said.