Price management for two goals: Control inflation and support growth

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Deputy Prime Minister VuongDinh Hue, Head of the Price Steering Committee, conferred the Prime Minister's Certificate of Merit to individuals who have made significant contributions to the communication on price management and administration in 2018.

The two most important economic indicators are inflation at 2.79 percent, the lowest in the past 3 years, and economic growth continues to reach over 7 percent, ranking among countries with the highest economic growth rates in the world. What do these numbers mean?

The inflation index in 2019 was 2.79 percent, which is relatively low compared to the expected economic growth of 7.02 percent. Thus, the growth of 2.5 times higher than the inflation index shows the meaning, firstly, that people's incomes increase, whilespending and production efficiency of enterprises are good. The second is to create confidence amongpeople and society in the task of controlling inflation as well as solutions to promote economic growth of the Government.

In fact, 2019’s inflation is too low. If we adjust the price and cost management according to the roadmap (step 3), it will make much more sense. What do you think about this?

The management and administration of prices need to achieve two objectives: First, macroeconomic stability and inflation control; the second is the need to structure costs according to the schedule. In 2019 and previous years, in addition to controlling inflation under the target, we took advantage of the adjustment of the prices of state-controlled public services such as education, electricity and healthcare services.

In 2019, for medical examination and treatment services, the Ministry of Health has made every effort to adjust this service to reach the market. However, recently, the Government as well as the Prime Minister, Head of the Price Steering Committee has assigned the Ministry of Health to review and evaluate the economic and technical norms. From over 18,000 services to 9,000, even down to about 3,000 medical services for specific norms to meet the price adjustment requirements. The workload is very large; although the Ministry of Health has made great efforts, it has not yet finished the arrangement of that level. Therefore, the management cost into the price of medical services is slower than the requirements set during price administration.

However, this issue will continue to be considered inthe coming years, so we can gradually approach the market-based medical examination and treatment service to promote the quality of medical examination and treatment for people.

In 2020, if this cost is applied, what will the impact on inflation be? Can people afford to pay?

According to the price management scenario and the roadmap for medical examination and treatment services, the first is the integration of wage increases from July 1, 2020 (basic salary increased from VND1,490,000 to VND1,600,000) on medical examination and treatment prices. The second is to continue to study how the administration cost (step 3) will impact the overall inflation of the year. Particularly for the cost of medical examination and treatment services with additional management costs, according to our assessment and statistics, the impact on the CPI increased by about 0.13 percent. This increase is transparent and helps improve the quality of medical examination and treatment, to free up production capacity of the health sector and reduces direct budget spending for the health sector.

We consider this cost increase to have a partial impact on groups of patients without health insurance and patients with health insurance will not be affected.

In addition to supply and demand of goods, in terms ofexternal factors such as trade conflicts, exchange rates and interest rates, what needs to be noted in 2020?

Examining, researching and forecasting the market price situation, advising the competent authorities, especially the Government and the Prime Minister to issue price management documents, it is necessary to look at factors affecting the price level.

In 2020, we have assessed the challenges for this work. Firstly, the external political factors will impact the domestic market, and then trade conflicts between major countries, epidemics on a global scale, natural disasters, storms and floods are very unpredictable. In addition, the country will be under pressure of adjusting the prices of state goods that continue to structure according to the market.

Secondly, the price level will be directly affected by imported fuel prices, such as gasoline and gas prices. And the challenge is that we also need to develop a scenario to manage prices under the schedule as well as managing prices according to inflation control targets as required by the National Assembly and the Government.

Mr. Nguyen Anh Tuan, Director of the Price Management Department.

Pork prices have risen sharply in 2019 and will have an impact on inflation in the first quarter of 2020. How has the steering committee of price management directed this item?

African swine feverwas the problem. From the beginning of 2019, the disease has spreadand I understandthe Steering Committee for price management under the chairmanship of Deputy Prime Minister VuongDinh Hue also set out from the beginning of 2019 that it is necessary to forecast and evaluatepork supply when facing epidemics. As expected, pork is in short supply due to the impact of the epidemic. Therefore, the calculation of supply to meet the needs of people in December 2019, especially in the first quarter of 2020, ensuring prices are consistent with the market and encouragement ofprice stabilization measures were considered. The Ministry of Finance has proposed solutions, including solutions to import pork from countries with trade relations with Vietnam, supplementing certain deficiencies, and proposing ministries to facilitate the importation of pork takes place quickly and promptly compensates for domestic demand.

After many years of calculation, the price index has happened exactly as predicted from the beginning of the year. So, with many challenges in 2020, which factors are important for us to assureinflation continues to be below 4 percent?

A week ago, the Government Price Steering Committee met at the end of the year and identified the situation in 2020 as relatively challenging. In particular, the Steering Committee pointed out the pressures affecting inflation, factors that reduce the pressure on inflation and gave three operating scenarios.In which, Deputy Prime Minister VuongDinh Hue set price management requirements under Scenario 1 (3.59 percent) and Scenario 2 (3.91 percent), are increases below 4 percent at the request of Congress.

Specifically, ministries and sectors will have to have a price management scenario for the short-term and medium-term period, as well as for the whole year to achieve the goal. The Deputy Prime Minister also emphasized that in the first quarter of 2020, the price of some goods and services managed by the State will not be adjusted but calculated, choosing the dosage and timing of increase in other quarters of 2020.

Do you think the price management over the years being both inclusive and refined in every area to control prices but still have to find a direction for economic growth? Is there any contradiction in the way this policy isbeing done?

The price administration must ensure the goal of controlling inflation is the first priority. In addition, price management will also contribute to promoting growth as you and I have discussed the case ofmedical care service. These are two important and non-conflicting goals. We need to set out solutions for growth, remove difficulties for production and business, promote domestic consumption, thereby controlling prices, stabilizing prices with market instruments to stabilize macroeconomics and facilitating positive growth. When the economy grows on the basis of controlled inflation, it will reinforce the stability of the macro economy.

Doing well in price management, I think that there will be a great meaning in creating trust of society for the management of prices as well as for the direction and administration of the Government, the Prime Minister and the Steering Committee to price management.