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Being cautious in adjusting prices of essential goods to avoid the risk of rising inflation. Photo: ST

Many forecasts show that the ability to control inflation below 4% this year is completely grounded, but along with that, there are concerns that it will be difficultachieve growth and inflation targets.

Keeping inflation from 3.3-3.9%

According to data released by the General Statistics Office, the average CPI in the first quarter of this year only increased by 2.63% compared to the same period in 2018. This is the lowest average increase in the first quarter overthe last 3 years.

One of the main reasons for this result, in addition to being affected by the impact of laws of consumption after the Lunar New Year, the impact of African swine flu, the proactive management of gasoline prices, the determination of flexible monetary policy to maintain the Government's macroeconomic stability goal is one of the important reasons. According to an assessment, the pressure to control inflation will be reduced thanks to the low CPI in the first quarter. According to the National Assembly's target, inflation in 2019 will have to be kept at below 4%.

This is also consistent with many judgments coming from economic organizations. Recently, predicting inflation in 2019, experts from the Asian Development Bank (ADB) said that in Vietnam, inflation will be stable in 2019 but will increase in 2020.Accordingly, inflation is expected to beat 3.5% in 2019 and increase slightly to 3.8% in 2020.

According to Nguyen Minh Cuong, ADB's economic expert, the US Federal Reserve announced that it will not raise interest rates in 2019,helping reduce pressure on the Vietnamesedong and inflation, similar to the impact of the decrease of world oil prices. However, ADB experts also warned that rising prices for education and health services and electricity prices could increase inflationary pressures, similar to the increasing minimum wages.

Regarding the increase in electricity price from March 20, which may impactinflation in the future, experts fromBao Viet Securities Company (BVSC) believe that the increase in electricity prices does not pose a risk to inflation in 2019.

According to BVSC's calculations, as the proportion of electric goods in the CPI accounts for only 3.5%, if the impact of the first round is most direct, the increase of 8.36%in the average electricity price will also make the overall CPI increase by 0.3% and the impact of the increase inprice will be reflected in April.

At the recent meeting of the Steering Committee on Price Management, Deputy Prime Minister Vuong Dinh Hue said that the Government could completely control inflation of 2019 at 3.3-3.9%, which goes beyond the requirement ofthe National Assembly. To achieve that result, the Deputy Prime Minister asked ministries and branches to calculate and manage prices of goods and services according to market signals. Accordingly, the Ministry of Industry and Trade will take prime responsibility and coordinate with the Ministry of Finance in actively grasping information on world price movements to make plans to adjust the domestic petrol and oil prices, in combination with the reasonable use of stabilization fund for fuel to stabilize prices when world prices fluctuate abnormally, do not affect the target of inflation. At the same time, require the ministries to continue to increase publicity and transparency of input costs of electricity prices, results of electricity production and business as prescribed.

Caution in price adjustment

In addition to the positive forecasts of inflation control in 2019, there are many judgments concerning this issue when there are still many unfavorable factors.

Recently,experts from the National Economics University, in a study on Vietnam's economic prospects in 2019, warned that inflation and exchange rates werewithin the expected adjustment range, but confronted significantpressure.

Assoc. Prof. To Trung Thanh, Head of Scientific Management Department, National Economics University, forecast that economic growth in 2019 might not reach as good a rate as in 2018, while inflation tended to increase, although still able to be controlled below 5%.

One of the factors that will affect inflation in 2019 is gasoline prices. According to the study bythe National Economics University, if the gas price increases by 5%, the impact on the economic sectors will be huge. Shipping, storage and postal services; accommodation and catering services; seafood; oil, water supply and waste services; transportation and warehousing services are five sectors that will bestrongly and immediately affected by rising oil prices.

According to Assoc. Prof. To Trung Thanh, the impact of rising oil prices is huge, both directly and indirectly to most important manufacturing industries, which have a great impact on production and business activities of enterprises.

Discounting the effect of resonance from the increase in electricity prices and other products that will affect the economy much more. Therefore, it is necessary to be careful in managing prices to avoid sharply increasing production costs from the next quarter, making it difficult for businesses and affecting the inflation control target.

On April 2, the price of petrol and oil increased sharply after the previous administration period, the price of petrol was kept unchanged because the State decided to use thestabilization fund instead of increasing the price to bein line with global oil prices. According to the assessment, the impact of increasing gasoline prices and electricity prices will be clearer from the second quarter of 2019, so the prices of other goods managed by the State needs to be adjusted carefully and reasonably to avoid risk of inflation due to rising production costs in the comingquarters.

Forecasting the consumer price index, Ms. Do Thi Ngoc, Director of Price Statistics Department (GSO), said that there are many factors affecting CPI in the coming months such as the world petrol price increasing, electricity price increasing by 8.36% since March 20, basic salary increasing from July 1.

Therefore, in order to control CPI and create opportunities to complete the inflation control target below 4% in 2019, the General Statistics Office representative recommended, in the second quarter, it should not adjust any items managed by the State, so that the price level of the second quarter of this year is lower than that of the second quarter of 2018.

For two important commodities of electricity and gasoline, Ms. Do Thi Ngoc said that for gasoline, the Ministry of Industry and Trade and the Ministry of Finance should continue to coordinate and operate flexibly the price stabilization fund to limit the impact on CPI. With electricity, the increase in price will directly affect the input costs of businesses, so Ms. Do Thi Ngoc recommends businesses need to have a production plan to save and produce at the time of low point or use natural light, and reasonable power saving measures to minimize input costs. Particularly for health services, a representative of the General Statistics Office said that it is necessary to adjust wages in August and by the end of the year, it will consider adjusting the actual management costs.

Petrol price cut, could have "given a sigh of relief" with inflation?

In addition to the above factors, African swine fever is also one of the factors that could cause the increase in price of pork by the end of the year due to the supply beingaffected, if pig re-breedingis notundertaken. In order to avoid the possibility of high price of pork at the end of the year, which may affect inflation in 2019, Ms. Do Thi Ngoc recommends that the propaganda should be done well to prevent people from turning away from pork due to the current situation. Though many provinces have not been hit by the disease,people are not buying pork. In addition, it is necessary to have a reasonable plan for pig re-breeding to avoid the lack of supply, leading to the increase in price in the future.