Is it difficult to achieve an inflation target of below 4%?

Mr. Nguyen Trung Tien said that we need to analyze commodity groups that may affect the CPI. Photo: Xuan Thao.

The risk of “inflation accompanied by economic recession”

In early 2022, the National Assembly approved the target of 6-6.5% of GDP growth, and 4% average inflation. However, experts said that the target is very different from the current global and domestic context. Meanwhile, the economy is suffering from challenges, such as rising production costs, low investment demand, sensitive inflation expectations, which may lead to the risk of inflation accompanied by an economic recession.

According to Mr. Nguyen Trung Tien, Deputy Director General of the General Statistics Office, the CPI in the first quarter rose by 1.92% compared to the previous year.

This is a high increase, but it is under control thanks to effective measures while other countries are seriously affected by rising prices of petroleum products.

Regarding the CPI in the near future, Deputy Director General Nguyen Trung Tien said that we need to analyze commodity groups that have an impact on the CPI. Firstly, the group of food and catering services, except for pork, because the price of this item saw a sharp decrease.

Secondly, Vietnam is returning to a new normal status, students come back to schools, and production reopens, which will cause an increase in food consumption, thereby, having a great impact on consumer prices because this food group accounts for 33.36%.

Tien said this is the biggest risk causing an increase in consumer prices in the near future.

In addition, the producer price of goods is under pressure due to the increase in raw material prices in the world in the second and third quarter of last year, but our producer prices have not risen due to weak demand. This also causes upward pressure on prices in the coming months due to the large openness of Vietnam’s economy, large proportion of the processing, and disruption of world supply, leading to the sharp increase in raw materials increases.

For example, in the first quarter, Vietnam exported electronic products and mobile phone components worth over US$29 billion, but the country imported these items valued at US$26 billion. This is the main reason for the CPI increase in the following months.

The price of petroleum products depends entirely on the Russia-Ukraine conflict. The average gasoline price in 2022 will be higher than in 2021 and affect all input costs of the economy. The CPI in 2022 will tend to increase in the following months. The level depends on world prices as well as the management of the Government.

“As the world economy recovers, the demand for raw materials rises while the current supply is disrupted, causing a surge in international commodity prices, high inflation pressure in many countries, including leading economies such as the US, Japan, and Europe that are Vietnam’s major partners. Therefore, the 4% inflation target can be achieved, but it is a difficult task," said Tien.

The price is under control

According to Deputy Director of the Price Management Department (Ministry of Finance) Dang Cong Khoi, price management is still under control. The management from now until the end of the year still faces unpredictable factors. We need to update information for analysis, assessment, and providing forecasts and flexible adjustments for the scenarios to control inflation in line with the target of the Government and the National Assembly.

In order to manage the price, we have to evaluate the price movement in each month and quarter. At the same time, we calculate scenarios to report to the Government, the Prime Minister and the Steering Committee to provide effective solutions.

There will always have three scenarios, best-case scenario, medium-case scenario and worst-case scenario. "The government has always set a requirement for prudent and flexible price management, so we follow the price movements,” said Khoi.

According to the Deputy Director, the gasoline price is the most unpredictable factor, which is the decisive factor to the successful implementation of price control scenarios. "In the worst-case scenario, we have also taken into account that the average petrol price will sharply increase by about 40%, so the inflation control will face many difficulties. Of course, we will have to promptly report to have enforcement solutions and make flexible adjustments."

“Currently, we still control the price movement and comply with the direction of the Prime Minister and Deputy Prime Minister. When there is a great influence, we must calculate the scenarios, so that we can handle the situations," Khoi said.