There are still many challenges and difficulties in controlling inflation

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Economist Ngo Tri Long

What are your comments on the factors affecting inflation control in 2019?

In the last meeting of the Executive Board, Deputy Prime Minister Vuong Dinh Hue, Head of the Price Steering Committee, confirmed that it will definitely control inflation to reach the target. That is the subjective idea of ​​the Government, the remaining problem is whether the administration of the Government can achieve the goal or not.

In fact, inflation control is not just about direct commodity prices, but the first direct impact is the impact of monetary policy, second is fiscal policy, and third is tradepolicy and fourth is management and price management.

Inflation manifested in two issues is internal purchasing power (representing consumer price index) and foreign purchasing power (expressed in exchange rate policy).

It can be seen that inflation is considered to be the price of some items, but it is only a direct impact, besides there are other factors such as monetary governance policy, including the operating policy on money supply; credit policy; exchange rate policy; interest rate policy.

In the first quarter of 2019, credit growth was very low, while consumer credit growth was about 19%, mainly home loans, home repairs, that is not worrisome. Compared to the region and compared to China, our credit growth and growth rate is still relatively reasonable, lower than them.

With the exchange rate policy, this year the Fed announced not to raise interest rates, while our exchange rate operating policy is very flexible so we can control them. Interest rates tend to be relatively stable. And the financial policy must have an impact to combat the loss of revenue, to ensure the increase in revenue as prescribed, increase the revenue, but to ensure the nurturing of the revenue source. Financial policy also affects inflation in a way that balance of revenues and expenditures must be effective.

What will be the role of price management, especially the price of some important commodities in controlling inflation in 2019?

Price management is an important issue. In the current context, people are very concerned about the increase in prices of two essential commodities, electricity and gasoline. However, I think that electricity price increase is indispensable to meet the demand of electricity in the market.

It is important that in recent times both electricity and gasoline - two important inputs of many industries in the economy will increase, causing both direct and indirect impacts. The direct impact is round 1, which means that the industry consumes the most electricity and consumes a lot of petroleum, the industry is most affected. But the second round impact is from increased costs and production costs, through consumption will make the impact spread.

For example, when electricity increases, iron and steel, cement and chemicals increase. Cement production uses a lot of electricity, making this material price likely to increase. Gasoline is the same, especially when the index with gasoline prices is complicated and unpredictable.

Can you clarify how petrol prices affect inflation control?

We see oil prices increase continuously from March to now and the trend continues to increase. In the adjustment period of March 18, it was reasonable that the world price of petrol and oil increased at that time, we also adjusted accordingly. But because of the electricity price increase on March 20, the State did not raise gasoline prices but used stabilization funds. This makes the price of gasoline not close to the world price, causing a corollary effect, when the world oil price continues to rise, the next period must be very strong. I think that running compressed form is detrimental to both production and consumption. The administration of the government agencies is to recognize and forecast in the future and in economic management, it is necessary to harmonize the interests of the State, enterprises and consumers. In the past two executive periods, the State has paid too much attention to macro-control objectives.

Controlling inflation of 2019 faces many challenges, including epidemics. How does the current African swine fever affect market prices at the end of the year, sir?

During the epidemic, the price will always decrease, when people do not consume the product. Recently, our growth rate is lower than that of the first quarter of last year. One of the reasons is due to agricultural production, partly due to African swine fever. The impact on the immediate price is falling, but after falling, the price is now recovering and almost increasing again. But in the future, if the group does not re-supply properly, the supply will not meet the demand, the price will surely increase. When prices rise, the State must use commercial tools as import and export tools. When not produced in the country but having to import, it will affect the trade deficit, affecting foreign currencies, affecting domestic production. This is about epidemics, not to mention natural disasters. In the first quarter of 2019, although the 3-month price index increased by 2.65%, it was only a quarter of the time, we still have 3/4 time, so there are still many challenges and difficulties ahead. .

The openness of the Vietnamese economy is quite high, how does this affect inflation in 2019?

In order to achieve inflation control target below 4%, there are many challenges, especially the ones from inside the economy of Vietnam, when the macro economy has stabilized but has not had a solid foundation. The challenges ahead are still many, mainly their productivity, quality and efficiency are not high. For example, compared to the development of other countries, our development level is still very low. This is an extremely important core factor that makes inflation likely to increase rapidly. Secondly, due to external factors, the world situation is always unstable, we are in integration, the economy opening is very high, at 230%. With such a high degree of openness, if there are external fluctuations, but the internal economy has not had stable development, the impact is certainly very large. We should understand, our goal is to stabilize the macro economy, which is an important pillar of macroeconomic control of inflation. The second pillar is the exchange rate policy and the third pillar is dealing with jobs. Those are the three main contents that we must be very wary of for inflation, macroeconomic stability.

Thank you Sir!