Solutions to " remove the detonator" of inflation in 2024

Vietnam has been successful in controlling inflation

According to the assessment of the General Statistics Office, the world commodity market in 2023 will have many fluctuations and be influenced by economic, political and social factors. The military conflict between Russia and Ukraine continues along with increasing instability in the Middle East. Many countries maintain tight monetary policies, weak aggregate demand, and slow economic growth, while the financial, monetary, and real estate markets in some countries have many potential risks.

Extreme weather conditions occur in many places, prolonged droughts on a large scale, storms and floods, and natural disasters in many countries cause imbalance in food production and consumption. Global inflation from the beginning of the year until now has tended to decrease gradually after countries simultaneously raised interest rates to curb inflation along with falling energy prices. But compared to long-term goals, current inflation levels remain high for many countries.

In this context, domestically, the Government and the Prime Minister have proactively, drastically and closely directed ministries and branches to implement many solutions to remove difficulties, promote growth and maintain the stability of macroeconomics, controlling inflation, ensuring major balances of the economy. Thanks to that, in 2023, January CPI increased by 4.89%, inflation pressure was huge but then gradually decreased, by June the increase was only 2%, by December it increased by 3.58%. The average inflation for the whole year of 2023 was 3.25%, meeting the target set by the National Assembly.

Such results were achieved because during the year many solutions were actively implemented such as: reducing lending interest rates, stabilizing the foreign exchange market; promote disbursement of public investment capital; deploy credit packages to support industries and fields; Reduce value added tax on some groups of goods and services from 10% to 8% from July 1, 2023; Reduce environmental taxes on jet fuel; exemption, reduction, extension of taxes, fees, land use fees, and business support; visa extension for tourists; remove difficulties and obstacles in the corporate bond and real estate markets; Social security work is paid attention to.

Accordingly, the market for essential goods has no unusual fluctuations and supply is guaranteed. In addition, the price reduction of some commodities according to world prices has also contributed to reducing inflationary pressure such as the average gasoline price in 2023 decreased by 11.02% compared to 2022, gas price decreased by 6.94%. Therefore, in 2023 Vietnam was successful in controlling inflation.

Wage reform and increasing the regional minimum wage from July 2024 will lead to an increase in the prices of household consumer goods and services. Photo: TD.

Quickly make plans and roadmaps to adjust prices of items

Referring to factors creating inflationary pressure in 2024, Ms. Nguyen Thu Oanh, Director of Price Statistics Department, General Statistics Office said that world input raw material prices are at a high level while Vietnam is a country that imports many raw materials for production, it will affect costs and prices, putting pressure on businesses' production and thereby pushing up the prices of domestic consumer goods. In addition, the rising US dollar increases the cost of importing raw materials, putting pressure on the price level of domestic goods.

In addition, the implementation of adjusting the prices of state-managed services in the direction of correctly and fully calculating the factors and implementation costs into the price of medical services and educational tuition will have an impact on increasing CPI; EVN can continue to increase electricity prices when input materials such as gasoline and coal are at high levels.

At the same time, wage reform and increasing the regional minimum wage from July 2024 will lead to an increase in the prices of household consumption goods and services. Prices of food, beverages, garments, equipment and household appliances often increase as a rule in the last months of the year and during holidays. In addition, natural disasters and epidemics can affect food prices in some localities, which will also increase CPI and recovery support programs and public investment disbursement of the government, tourism services, etc are expected to put pressure on the price level in the near future.

However, besides the factors that can put pressure on inflation, there are also factors that help reduce pressure on the price level such as support for reducing environmental taxes on gasoline and reducing VAT that continue to be implemented in 2024.

In order to achieve the target of controlling inflation in 2024 set by the National Assembly, the Director of the Price Statistics Department recommends that the Government, ministries, branches and localities need to closely monitor price developments and inflation in the world, promptly warn of risks affecting prices and inflation in Vietnam to take appropriate response measures to ensure supply and stabilize domestic prices. Ensuring the smooth supply, circulation, and distribution of goods and services, especially for petroleum and strategic items that are likely to be affected by global supply chain disruption, unpredictable and complicated geopolitical tensions between Russia and Ukraine.

Ms. Nguyen Thu Oanh recommended that ministries, branches, People's Committees of provinces and central cities need to closely monitor price developments of essential goods (food, foodstuffs, pork, gasoline, oil, and gas, etc) to have appropriate operating solutions and proactively prepare goods sources at the end of the year to limit  price increases. At the same time, it is necessary to have measures to control and stabilize prices, strictly handle violations, avoid unreasonable price increases, develop and calculate the dosage and timing of price adjustments for all items, state-managed goods and services (electricity, medical services, educational services) to be consistent with the goal of controlling inflation.

In addition, the Government needs to continue to operate monetary policy proactively, flexibly, cautiously, and coordinate closely with fiscal policy and other macroeconomic policies to control inflation according to the set target, soon develop plans and roadmaps to adjust commodity prices to avoid being passive in policy coordination.