With synchronous solutions, controlling inflation in 2024 as the set target is feasible, but we still cannot be subjective because the pressures are still very great. Dr. Nguyen Bich Lam - former General Director of the General Statistics Office shared this with the Banking Times.
What do the CPI figures for the first two months of this year show and what is your forecast for the ability to control inflation throughout this year?
January and February have many holidays, especially the traditional Lunar New Year this year takes place entirely in February, the need to buy and sell to prepare for Tet increases, total demand increases, so prices increase. This is a seasonal rule that occurs every year in the first two months of the year, so it is normal for CPI to increase. Then in March and April, CPI only increases slightly, or may even decrease. Usually in March, CPI will decrease quite sharply compared to February, causing the average CPI for 3 months to be lower than the average of 2 months.
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| Proactively supply domestic food to reduce price pressure |
| Prime Minister Pham Minh Chinh emphasized strengthening price and market management; ensuring inflation control according to the set target, while promoting growth. |
Considering both domestic and foreign factors, I believe that the ability to control inflation in 2024 as targeted is feasible. Because the pressure from demand-pull inflation (the rapid increase in demand for goods and services in the market, causing prices to rise) is not large because global and domestic aggregate demand is unlikely to recover as strongly as expected. In addition, the proactive and abundant supply of domestic food and foodstuffs - a group of goods that accounts for a large proportion of people's spending and has a great influence on the CPI, helps reduce the pressure on price increases.
Meanwhile, the Government has always emphasized and consistently implemented the priority goal of growth associated with macroeconomic stability, inflation control, and ensuring major balances of the economy. This has helped build confidence for the business community to recover and develop production, while helping to reduce expected inflation. Along with that, a number of tax support policies will continue to be applied in 2024; global inflation continues to cool down, which will also help reduce the pressure of "importing" inflation... With such factors helping to control inflation and the Government's drastic direction and management; aggregate consumer demand has not shown signs of strong improvement, so the target of controlling inflation in 2024, in my opinion, is completely feasible.
But it's not the end of the first quarter yet, so inflationary pressures are still there. Of the factors that could cause pressure this year, which one do you find most worrying?
Yes, we still cannot be subjective. The inflation trend from now until the end of the year is still under a lot of pressure from existing pressures from both domestic and foreign sources. Abroad, inflation, interest rates are still high and the USD is still on an upward trend and is unlikely to decrease as quickly as expected at the end of 2023, which is one of the reasons leading to pressure on domestic exchange rates; the risk of increasing prices of oil and basic raw materials; geopolitical tensions and disruptions in transportation routes... Domestically, electricity prices fluctuate in an upward direction; rice prices increase according to export prices (especially in the context that the world's leading rice exporting countries such as India, Russia, UAE may continue to have restrictions and bans on rice exports to ensure food security); adjusting prices of state-managed goods and services...
In 2023, Vietnam Electricity Group increased electricity prices twice with a total increase of 7.5%, which will affect production costs and product prices of enterprises in 2024. Along with that, the pressure on electricity prices continues to increase in 2024; extreme weather phenomena; forecasted demand for electricity for production and consumption in the coming time will continue to increase, especially when the weather turns to summer... will push up the household electricity price index, creating quite a lot of pressure on inflation.
Furthermore, in Vietnam today, credit is being pumped out strongly (credit growth is expected to be about 15% for the whole year and this credit room has been fully opened), including encouragement to increase consumer credit (while savings interest rates have dropped very low), which is an invisible factor that can cause expected inflation, although in reality, credit growth is still slow when capital absorption is still weak, due to difficulties in domestic and foreign output markets.
Based on the inflation developments of the past two months and such challenges, what recommendations do you have to achieve the inflation control target this year?
I think that the Government and ministries, sectors and localities need to have solutions to ensure adequate supply at stable prices for food and foodstuffs. In addition, there should be plans and solutions to ensure national energy security. The Ministry of Industry and Trade should promptly grasp world oil prices, improve forecasting capacity and quality, have comprehensive solutions to ensure adequate supply, and improve oil and gas reserve capacity to meet the needs of the economy. At the same time, forecast, develop plans and solutions to provide enough electricity for production and consumption in any circumstances.
Regarding the adjustment of retail electricity prices, I think that the Draft of the Ministry of Industry and Trade (which is seeking opinions from ministries and branches to submit to the Government a draft Decision on the mechanism for adjusting average retail electricity prices to replace Decision No. 24/2017/QD-TTg dated June 30, 2017) proposes to reduce the time for adjusting electricity prices, giving EVN the authority to adjust electricity prices for retail electricity price reduction margins of 1% or more, increase retail electricity prices from 3% to less than 5% and within the price range. This is a solution that will help eliminate the current inadequacies in retail electricity prices, gradually orienting electricity prices to operate according to a competitive market mechanism, with increases and decreases. Therefore, EVN must base on the actual and reasonable cost of electricity production to decide to increase or decrease retail electricity prices.
At the same time, it is necessary to carefully assess the impact of price increases of goods and services managed by the State on inflation and economic growth to decide on the appropriate level and timing of adjustment, meeting the goal of controlling inflation and reducing the impact on people's lives. Another important factor is that the Government needs to implement flexible and appropriate fiscal and monetary policies to maintain macroeconomic stability.
Along with that, it is necessary to effectively carry out communication activities to promptly, accurately and clearly inform about the Government's policies and solutions for direction and management; eliminate and strictly handle false information about market prices, prevent inflation caused by psychology from false information, especially reduce expected inflation before fiscal and monetary policies and solutions and salary adjustments.
The business community needs to fully prepare the conditions to boost production and business, ensuring supply for the market of goods and services. Proactively update information, accurately forecast market movements to seize opportunities, reduce risks in the context of weak global aggregate demand; risks of disruption and breakdown of supply chains and logistics still exist...; focus on investment and switch to using renewable energy, thereby cutting costs due to high energy prices and increasing profits in the long term. On the other hand, invest in technology, human resources and other areas to improve labor productivity, competitiveness, and promote growth.
Thank you!
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