Keeping inflation below 4 is very difficult

Economist: Vu Vinh Phu

In reality, commodity prices are trending up, causing the consumer price index to increase month by month. This puts pressure on inflation control in our country. What do you think about this situation?

It is not unusual for Vietnam to suffer from high inflation pressure, especially since inflation pressure does not only come from oil prices, but also from many other factors. Therefore, keeping inflation below 4% in 2022 is very difficult.

The environmental protection tax on gasoline and oil has been reduced by 50% and a number of other policies to limit unfavorable fluctuations are not enough to reduce the price of gasoline and oil as well as the prices of other essential goods.

Therefore, it is advisable to take advantage of the opportunity to reduce value-added tax, excise tax and even environmental tax on gasoline and oil to curb the growth of this commodity.

Price management and inflation control by the Government as well as related ministries and agencies are facing many difficulties. Can you point out some solutions to overcome difficulties for inflation control?

The first is the issue of energy and materials. Currently, production, business and services in Vietnam are still heavily dependent on energy, raw materials and auxiliary materials of other countries, especially in industries such as electronics, textiles, footwear, plastic, iron and steel, chemicals, etc. This is detrimental to Vietnam when the prices of energy and raw materials increase.

It is necessary to overcome the above difficulties by proactively storing energy and searching for raw materials and auxiliary materials in the country as well as in other countries to avoid dependence on a few countries.

It is necessary to urgently reconnect supply chains for import and export, goods, materials and consumption in the domestic market, invest in the construction of transport infrastructure, reduce transportation and logistics costs in order to lower product costs, improve the competitiveness of Vietnamese goods in the domestic market in order to reduce inflationary pressure.

The second factor to consider is consumer demand. After a period of social distancing, consumer demand was compressed, now it “expanded” more strongly, making the demand for shopping, tourism and services develop rapidly with larger quantities and cycles.

The increase in procurement made up for the shortfalls during the pandemic, thereby creating inflationary pressure at the beginning of the year, specifically increased pressure due to shopping and tourism. It is necessary to encourage thrift and rational consumption among all classes of the population, focus on shopping for essential goods and relieve the mentality of hoarding goods.

The third factor when it comes to inflation is the role of the national distribution system. After two years of the pandemic, once a market (including wholesale markets and supermarkets) is temporarily closed, it is very important to ensure that the consumption of goods is interrupted, especially agricultural goods that no one harvests and transports to the place of consumption. In retail channels, goods are in short supply, causing speculation, raising prices, causing the price of goods from production to retail consumption to increase 3-4 times, causing instability in the market.

Therefore, it is necessary to continue to strengthen the domestic distribution system, including the implementation of open and transparent transactions, and resolutely deal with manipulations at the retail stage of a company. Some brands have the power to make prices increase.

All of the above actions are aimed at limiting price fluctuations, contributing to limiting the overall CPI growth rate in 2022 and also in the following years.