Concern about inflation

However, the increase of 2018 is much higher than the same period last year, so experts also warned that it is important to keep an eye on the evolution of the consumer price index to be able to control inflation as the target.

High CPI

According to data from the General Statistics Office, from January, the consumer price index (CPI) has increased rapidly, up to 0.51% compared with the previous month. The reason is that 10 among 11 groups of goods increased in price. In particular, the highest group increase was drugs and medical services with 1.83% (in which, health services increased 2.34% compared with December 2017 and 38.71% compared to January 2017), the lowest increase was the education group and only telecommunication group was discounted. February is the key month of the Lunar New Year, CPI continues to rise 0.73% over the previous month. Of which, food and catering services rose the most with 1.53%, mainly due to rising consumer spending during the Lunar New Year and the demand of rice for export contracts. Other groups such as traffic, beverages and cigarettes, garment, hats and shoes ... also increased, contributing to the CPI increase. Previously, many experts said that the CPI increase at the beginning of the year is not too worrying because this is a temporary phenomenon happening when promoting the purchase of raw materials for production and shopping for Lunar New Year being at the same time. However, comparing the increase for the same period in 2017 as in recent years, obviously, the CPI in early 2018 had a noticeable evolution.

Accordingly, comparing the increases of 0.51% and 0.73% in the two months of 2018, in January 2017, CPI increased only 0.46%, when the New Year and Lunar New Year coincided in February 2017 CPI also increased only 0.23% over the previous month. In addition, the CPI of January 2016 was unchanged compared to the previous month and the CPI in February 2016 also increased only 0.43% with the long Tet holiday. The CPI in the first two months of 2015 even declined by -0.55%. Therefore, although the increase of CPI at the beginning of this year is in accordance with annual rules, the increase in 2018 is significant and the question is whether this is a warning about unpredictable inflation in 2018?

Concerns are not over, as in early February, Minister-Head of Government Office Mai Tien Dung said that the Prime Minister noted that the CPI increase of 0.51% in January is a high increase compared to the same period. Therefore, the Prime Minister asked the ministries and sectors to closely coordinate in increasing electricity, education and health services prices to ensure a CPI increase of less than 4% in 2018. The Prime Minister also has a special note about the price of goods in the Lunar New Year period. In the immediate future, there is no direction of increasing related prices and fees.

Prime Minister Nguyen Xuan Phuc: Controlling inflation is a big challenge

It is a significant difficulty in controlling inflation in 2018 in the context of rising interest rates, crude oil prices and basic commodities in the world; Domestically, we need to implement the market price roadmap for electricity, education and health services and also to neutralize the large amount of foreign currency that is pouring into the economy in the context of limited policy space, and the psychology of inflation expectations is still large. It is necessary to take initiative in managing the appropriate monetary policies, exchange rate and interest rates in combination with the fiscal and other macro policies in order to achieve the objective of macroeconomic stability and inflation control; To pay attention to the time and level of policy adjustment of other countries, especially the interest rates in order to have appropriate and timely measures.

(From the article written by Prime Minister Nguyen Xuan Phuc "Maintaining macroeconomic stability, creating a favorable environment for production and business, promoting rapid and sustainable development").

Pay close attention to inflationary pressures

Not only that, right after the results of socio-economic development in February was announced, Minister Mai Tien Dung said that the Government pays close attention on the fact that inflation pressure this year will be higher when crude oil and commodity prices in the world market tend to increase and the absorption of a large amount of foreign currency from FDI, indirect investment, remittances ... Therefore, the Prime Minister required specific measures, including appropriate adjustment of the market price roadmap, especially the price of electricity, water, education and health should be carefully calculated.

Previously, the National Centre for Socio-Economic Information and Forecast has warned that rising inflation from the beginning of the year would make controlling inflation difficult for the next months. Accordingly, the CPI in the first month of the year has sharply increased, predicting that CPI in 2018 will be higher than in 2017, which can affect consumption psychology, reducing private consumption and strengthening the trend of household savings. According to the growth scenario of the National Centre for Socio-Economic Information and Forecast, with the basic scenario, if economic growth in 2018 can reach 6.71%, inflation remains at a low level, about 3.8%. In case of high scenario, economic growth is about 7%, average inflation can be at 4.8%. But with the low scenario, when the measures to stimulate economic growth in 2017 are not effective immediately, causing inflationary pressures, which leads to macro instability (along with further price adjustment of public services such as health, education and electricity prices). Then, together with negative impacts from the world economy, Vietnam's economic growth rate will be lower than 2017, about 6.31%, while inflation can rise again at 4.2% and may be higher depending on the operating effectiveness of the policy.

According to economist Nguyen Tri Hieu, CPI in the first two months of the year, which is higher than the same period last year, is a concerning sign, but not a worrying sign, because it is just the first two months so we cannot confirm that the CPI for the whole year is going to increase. However, the expert also stated that inflation in 2018 is likely to rise higher than last year. The reason, according to expert Nguyen Tri Hieu, is that by the end of 2017 Vietnam's credit growth was quite strong, making a lag to affect inflation in 2018. In addition, in 2018 some items have higher prices than in previous years..., all these things will affect the inflation situation this year. "Therefore, the authorities should monitor the inflation situation closely to take appropriate measures, especially on the money supply. If inflation continues to increase in the coming time, the money supply must be limited. In particular, credit must be tightened because the growth of the Vietnamese economy relies heavily on credit. In addition to supporting growth, cash flow through credit in the economy is also the germ of inflation", said Mr. Nguyen Tri Hieu.