As predicted by experts and expected by the market, the rapid increase in inflation in the first two months of this year slowed down in March after the "seasonal" factor passed.
Through the period of increase due to "season"
Data recently released by the General Statistics Office shows that, compared to the same period last year, the CPI in March increased by 3.97% - slowing down compared to February (up 3.98%). Meanwhile, compared to December 2023, the CPI in March increased by 1.12%, marking a decrease in the growth rate compared to February (up 1.35%). And compared to the previous month, the CPI in March decreased by 0.23%, while the CPI in February increased by 1.04%. The CPI in February increased compared to the previous month when 9 groups of goods and services had price indexes increasing; 02 groups of goods had price indexes decreasing. Meanwhile, the CPI in March was the opposite, the decrease of 0.23% compared to the previous month was due to 7 groups of goods and services having price indexes decreasing, only 04 groups of goods had price indexes increasing.
Notably, some groups of goods and services that account for a large proportion and have a strong impact on the overall CPI increase in February, such as the index of food and catering services (especially food and foodstuffs), the transportation group, etc., recorded a sharp decrease in price index in March. Such developments are partly signs that prices are starting to stabilize relatively, returning to normal after the "seasonal" factor (Lunar New Year) has left behind.
Externally, the world economy is showing signs of better recovery, while inflation is falling rapidly, interest rates have stopped increasing and started to decrease. Combining such domestic and foreign factors, these are the bases for experts to believe that the ability to control inflation in 2024 as the set target is feasible. As Dr. Can Van Luc, Chief Economist of BIDV, commented, Vietnam's economic growth this year is forecasted to reach around 6.0% - 6.5% and inflation is completely under control, possibly below 4%.
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One thing to note is that GDP growth in the first quarter of 2023 increased by 3.41% while the average CPI increased by 4.18%; core inflation increased by 5.01% over the same period last year. In the first quarter of 2024, GDP increased by 5.66%, while the average CPI increased by only 3.77%; core inflation increased by 2.81% on average. This more or less shows that the current inflation index and GDP growth are more "in sync" than the same period last year and signal a positive trend for the economy in the coming time.
According to Ms. Nguyen Thu Oanh - Director of the Price Statistics Department, General Statistics Office, with many solutions implemented in recent times such as reducing lending interest rates, stabilizing the foreign exchange market; implementing credit packages to support industries and sectors; promoting disbursement of public investment capital; reducing value added tax on some groups of goods and services from 10% to 8%; ensuring abundant supply of goods... have helped control inflation at an appropriate level to support economic growth. However, challenges and difficulties affecting inflation in the coming time still remain.
Externally, although global inflation is on a cooling trend, there are still potential risks that could create new shocks. “Vietnam has a large economic openness, so changes in world inflation will quickly impact Vietnam’s inflation,” said Ms. Nguyen Thu Oanh.
Domestically, a number of factors are also likely to create inflationary pressure in the coming time. In particular, the demand for rice imports from countries such as China, Malaysia, South Korea, UAE... is forecast to continue to increase, although this will help Vietnam's rice exports continue to be favorable with high prices, but at the same time will also increase domestic rice prices.
Proactive and flexible management of macro policies
According to experts, inflationary pressure also comes from energy prices. In particular, electricity is a very important commodity in production and consumption, so it has a significant impact on inflation. A 10% increase in the household electricity price index will directly increase the CPI by 0.33%. In 2024, EVN may continue to increase electricity prices to ensure that it reflects fluctuations in input costs of electricity prices. Along with that, fluctuations in world oil prices affect domestic gasoline. Fuel prices are high and international experts predict that from now until the end of the year, gasoline prices will continue to increase, leading to an increase in domestic gasoline prices, creating pressure on inflation.
In addition, if the prices of state-managed services are adjusted in the direction of correctly and fully calculating all factors and implementation costs into the prices of medical services and education tuition fees, it will have an impact on increasing the CPI. The reform of state-sector wages and the increase in minimum wages for the enterprise sector, expected to be implemented from July 1, 2024, may increase inflation expectations, leading to an increase in the prices of consumer goods and services. Boosting public investment disbursement, on the one hand, helps to remove difficulties for the economy, but on the other hand, it may put pressure on the price level in the coming time.
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Based on the domestic market situation in the first quarter of 2024, assessing the world situation and analyzing factors affecting Vietnam's inflation in the coming time, the General Statistics Office has developed a number of inflation scenarios for 2024. The inflation scenarios are built through forecasting price fluctuations of groups of goods and services that greatly affect the consumer price index such as food, foodstuffs, electricity, gasoline, medical services, education services, etc. Accordingly, the three inflation scenarios for 2024 correspond to average annual CPIs of 3.8%; 4.2% and 4.5%, respectively.
To control inflation in 2024 to achieve the set target, experts have proposed a number of solutions. In particular, for the increase in prices of goods and services managed by the State, ministries and branches need to promptly plan, develop plans and roadmaps to adjust prices of goods under their management, from which the Government's Price Steering Committee will decide the time and level of adjustment in a synchronous and unified manner to suit the market while still ensuring the target of controlling inflation.
Closely monitor price and inflation developments in the world, promptly warn of risks affecting prices and inflation in Vietnam to have appropriate response measures to ensure supply and stabilize domestic prices. Ministries, sectors and localities need to closely monitor price developments of essential goods (food, foodstuffs, pork, gasoline, gas, etc.) and have proactive and appropriate management solutions 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, and spread false information that causes market instability.
Continue to operate monetary policy proactively, flexibly, cautiously, closely coordinate with fiscal policy and other macroeconomic policies to control inflation according to the set target. Along with that, strengthen communication work, provide timely and transparent information, create consensus among public opinion on the Government's price management work, stabilize consumer psychology and stabilize inflation expectations.
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