Three scenarios for price administration of 2023

In 2023, , there will be several pressures on price levels that come from a domestic and global background

Three scenarios

According to the Ministry of Finance forecast, there will be several pressures on price levels that come from a domestic and global background. Regarding the domestic situation, the price adjustment of goods and services following the schedule of the market is continued considering for implementation regarding some public services (medical examination and treatment services, educational services) after delaying for the past three years.

Along with that, some tax support policies (such as the VAT reduction policy) will expire; adjusting to increase the basic salary (from July 1, 2023) will cause the prices of some food items. In addition, natural disasters affect the prices of food, foodstuffs and some necessities in some areas.

However, according to the Ministry of Finance, there still have several supporting factors, such as essential consumer goods (foods), which have an abundant source of supply, meeting the demand of domestic consumption and export; the policy of reducing environmental protection tax on petroleum is expected to continue in 2023; the National Assembly and the Government's consistency in controlling inflation continue to help anchor inflation expectations and support inflation control in 2023.

Based on collecting information and updating price trend forecasts of important essential commodities as well as evaluation information of the Ministry of Planning and Investment (General Statistics Office) and the State Bank on the factors that impact inflation is 2023, the average CPI in 2023 is estimated at 3.1-3.2%, so there are three scenarios of price management set up as follows:

Scenario 1: Assume that gasoline price will drop by 5%; gas prices will increase by 2%; food prices (rice, pork) will increase by 3%; electricity prices for daily life will increase by 5%; the price of construction materials increase by 5%; education service prices increase by 15%; medical service prices increase by 4%; rental housing prices increase by 6%; thus the average CPI in 2023 is forecast to increase by 4.2% compared to 2022.

Scenario 2: Assume that petrol prices keep stable; gas price increase by 3%; food prices (rice, pork) increase by 5%; electricity price for daily life increases by 7%; price of construction materials increase by 6%; the price of educational services increase by 18%; medical service prices increase by 6%; rental housing prices increase by 6%, so the average CPI in 2023 is forecast to increase by 4.55% compared to 2022.

Scenario 3: Assume that petrol price increases by 3%; gas prices increase by 4%; food prices (rice, pork) increase by 5%; electricity price for daily life increases by 8%; price of construction materials increase by 6%; education service prices increase by 20%; medical service prices increase by 6%; rental housing prices increase by 6%; hence the average CPI in 2023 is forecast to increase by 4.98% compared to 2022.

With the above scenarios, the Ministry of Finance forecasted that the average CPI in 2023 will increase to 4.2-4.98%. The General Statistics Office forecasted the average CPI in the range of 4.4%-4.8% (with 3 scenarios of 4.4%, 4.6% and 4.8%, respectively), in which gasoline prices are assumed to be stable in 3 scenarios. The State Bank of Vietnam forecasted that the average inflation in 2023 would increase by 4.3 ± 0.5%.

Flexible price management

In 2023, the management and administration of prices should continue to be proactive and flexible, ensuring inflation control. Accordingly, ministries, sectors and localities will closely monitor economic developments and world inflation affecting Vietnam to have appropriate solutions, closely update the situation of domestic supply and demand to have local contingency instructions, and ensure the supply and the balance of domestic supply and demand.

Along with that, operating monetary policy following the set targets in coordination with fiscal policy and other policies contributes to stabilizing the macro-economy, controlling inflation, and ensuring major balances of the economy.

For goods priced by the state, public services are implementing the market roadmap, ministries, sectors, and localities are proactive in calculating and preparing price plans, and coordinating with the General Statistics Office to assess the impact on CPI to ensure priority is given to controlling inflation and stabilizing the macro-economy.

The Price Management Steering Committee will flexibly and effectively use tools and measures to regulate prices following the law on prices to control and stabilize the market. Furthermore, strengthens the effective implementation and supervision of price declaration and, price listing measures, public pricing information. At the same time, organizing the inspection and examination of the observance of the law on prices and strictly handling violations of the law on prices.