August 15, 2018 18:06

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Inflation control faces many challenges

19:54 | 07/06/2018

VCN- CPI in May 2018 increased dramatically and inflation in the first 5 months of 2018 hit and exceeded 3%. These are warning signals about the challenge of controlling inflation below 4% as is the target.

kiem soat lam phat doi mat nhieu thach thuc Should not loosen monetary policy
kiem soat lam phat doi mat nhieu thach thuc Brighter outlook for Vietnamese economy
kiem soat lam phat doi mat nhieu thach thuc Increase of petroleum price does not affect inflation control
kiem soat lam phat doi mat nhieu thach thuc
It is necessary to calculate and adjust the market price for some commodities with prices decided by the State at the right time to control inflation. Photo: H.A.

According to experts, it is necessary to urgently take measures to stabilize prices and curb inflation, which not only stabilizes the price of goods and services, but also stabilizes the macro-economy.

High pressure on inflation

Although 2018 has not gone half way through the year, the recent figures related to the consumer price index (CPI), make many experts and even managers worry.

The report on CPI of May 2018 by the General Statistics Office (under the Ministry of Planning and Investment) showed that CPI in May 2018 increased by 0.55% over the previous month, the highest in the last 6 years. The main reason for this increase is that 9 out of 11 groups of goods and services had a price index increase over the previous month, of which the transport group had the highest increase of 1.72%. The increase of this group was mainly due to the effect of two adjustments of petrol and oil price in May, with a total increase of more than VND 1,000 per liter, which made CPI increase by 0.16%. Accordingly, the inflation in the first 5 months of 2018 increased by 3.01% compared to the same period in 2017. With the goal of controlling inflation in 2018 below 4%, this number is clearly making people worry.

According to the Deputy Prime Minister Vuong Dinh Hue, the coordination in price management of Ministries brought positive results in the first 4 months of 2018. However, since the first quarter of 2018, the price of pork rose, and the price of rice, the price of gas, and so on put a lot of pressure on price management.

As a result, rising crude oil prices have contributed to the increase in domestic petroleum prices, which is the main reason for the increase of CPI in May 2018. This is also a potential factor predicting the impact on inflation in the coming time. However, not only complicated developments of world oil prices due to political instability in some OPEC countries may lead to an impact of domestic petroleum prices, but many prices of services and goods also continue to be a challenge for controlling inflation in the future.

According to the National Center for Socio-Economic Information and Forecasting, some of the challenges from new policies coming into effect may increase inflation. Specifically, the 2018 regional minimum wage will increase by 6.5%, equal to half of the original level of 13.3%. The adjustment of the average electricity price applied from 1 December 2017 with the new price of VND 1,720.65 per kWh, an increase of VND 100 per kWh compared to the current price. The adjustment of prices in medical examination and treatment services not belonging to the Health Insurance Fund in 18 provinces and cities directly under the Central Government, and the adjustment of the base salary in the calculation of medical service prices and the increase in the price of education will also affect CPI. In addition, the electricity price increased by 6.08% from 1 December 2017, which is expected to directly impact the CPI increase in 2018 and will indirectly affect the cost of other items using electricity as input costs.

With predictions about the impact of commodity prices on inflation, the National Center for Socio-Economic Information and Forecasting has released two inflation scenarios for 2018. If GDP increases by 6.83%, the inflation will be 4.5%, and if GDP increases by 7.02%, the inflation may be 4.8%.

Determined to control inflation

According to economist Luu Bich Ho, with the CPI increase from the beginning of the year and especially in May 2018, it may be difficult to achieve the target set for the whole year, as the world market prices are still rising. There is a tendency to increase the price of crude oil, not to mention the US-China trade disputes and widespread with other countries, which will make the price of some important materials and equipment increase. In Vietnam, prices of electricity and educational health services and some agricultural commodities such as pork are still likely to rise, the USD / VND exchange rate fluctuating in a rising trend may also affect prices in general.

In this context, the control of inflation must be conducted to maintain macro stability. At the same time, making effective investments, not following unsuitable growth leads to instability, tight control of money supply, focusing more on improving the quality of growth, increasing productivity to improve efficiency in all activities.

In a more optimistic perspective, Dr. Nguyen Duc Do, the Deputy Head of the Institute of Economics and Finance under the Academy of Finance, said that basic inflation in May 2018 was only 0.11%, much lower than the CPI of 0.55%. This shows that demand has not changed. For example, rising oil prices in the first three weeks of May 2018 have led to higher overall inflation, but in the past few days, oil prices have fallen sharply. And this factor will have the effect of curbing CPI growth momentum in June 2018.

As for the solutions to control inflation from now to the end of the year, the Deputy Prime Minister Vuong Dinh Hue said that it needs to keep the legal norms of CPI in 2018 for an increase of less than 4%. The PM asked the ministries to keep prices stable for the State-managed goods and to continue reviewing and accelerating the reduction of prices such as for medicines. At the same time, members of the Steering Committee for price control should focus on finding solutions to deal with external changes to domestic prices. With good implementation of the above measures, the Deputy Prime Minister said that it was entirely possible to control CPI below 4% in 2018.

kiem soat lam phat doi mat nhieu thach thuc High increase of CPI due to market factors

VCN- CPI in May is accessed to relatively high increase compared to recent times. What are the ...

Concurrent with the need to calculate the time to adjust the price roadmap for some commodities at the appropriate time, to avoid the spillovers in the price of common goods, economic experts stressed that the State must continue to support businesses to reduce pressure on price increases by continuing to improve business environment, cut down business conditions, reduce costs and fees for businesses.

By Hoai Anh/ Hoang Anh