Inflationary pressures have not eased.

While confident that with synchronized solutions, controlling inflation in 2024 as targeted is achievable, complacency is still necessary due to significant remaining pressures. Dr. Nguyen Bich Lam, former Director General of the General Statistics Office, shared this view with the Banking Times.

What do the CPI figures for the first two months of this year show, and what is your forecast regarding the possibility of controlling inflation for the whole year?

January and February have many holidays, especially the traditional Lunar New Year, which this year falls entirely within February. Increased demand for goods and services in preparation for the holiday leads to higher prices. This is a seasonal pattern that occurs every year in the first two months, so an increase in the CPI is normal. After that, in March and April, the CPI only increases slightly, or may even decrease. Typically, in March, the CPI will decrease quite significantly compared to February, resulting in the average CPI for the three months being lower than the average for the two months.

Proactively securing domestic food supply to reduce pressure on price increases.

Prime Minister Pham Minh Chinh emphasized the need to strengthen price and market management; ensure inflation is controlled according to the set target, while simultaneously promoting growth.

Considering both domestic and international factors, I believe that controlling inflation in 2024 as targeted is feasible. This is because the pressure from demand-pull inflation (when the market's demand for goods and services increases rapidly, pushing prices higher) is not significant, as global and domestic aggregate demand is unlikely to recover as strongly as expected. Furthermore, the proactive approach and abundant supply of food domestically – a group of goods that accounts for a large proportion of consumer spending and significantly impacts the CPI – helps to reduce upward price pressure.

Meanwhile, the Government consistently emphasizes and steadfastly pursues the priority of growth coupled with macroeconomic stability, inflation control, and ensuring the major balances of the economy. This helps build confidence among businesses to recover and develop production, while also helping to reduce inflation expectations. In addition, some tax support policies will continue to be applied in 2024; the continued downward trend of global inflation will also help reduce the pressure of "imported" inflation… With these factors helping to curb inflation, along with the decisive direction and management of the Government; and with aggregate consumer demand showing no strong signs of recovery, I believe the inflation control target for 2024 is entirely feasible.

But since it's only the first quarter, inflationary pressures are still present. Of the factors that could put pressure on inflation this year, which one do you find most concerning?

Yes, we still cannot be complacent. The inflation trend from now until the end of the year will still face significant pressure from both domestic and international factors. Internationally, inflation and interest rates remain high, and the USD is still strengthening rather than weakening as quickly as expected by the end of 2023, which is one of the reasons leading to pressure on the domestic exchange rate; the risk of rising oil and basic commodity prices; geopolitical tensions and disruptions to transportation routes… Domestically, electricity prices are fluctuating upwards; rice prices are increasing in line with export prices (especially in the context of leading rice exporting countries such as India, Russia, and the UAE potentially continuing to impose restrictions or bans on rice exports to ensure food security); and prices of state-managed goods and services are being adjusted…

In 2023, Vietnam Electricity Corporation (EVN) increased electricity prices twice, totaling 7.5%, which will impact production costs and product prices for businesses in 2024. Furthermore, continued upward pressure on electricity prices in 2024; extreme weather events; and forecasts of increased electricity demand for production and consumption, especially during the summer months, will push up the residential electricity price index, creating significant inflationary pressure.

Furthermore, in Vietnam today, the strong injection of credit (credit growth is projected at around 15% for the whole year, and this credit limit has already been fully utilized), including encouragement of increased consumer lending (while savings interest rates have fallen very low), is an invisible factor that could indirectly cause expected inflation, even though in reality, credit growth has remained slow due to weak capital absorption capacity, as both domestic and international markets are still facing difficulties.

Based on the inflation trends over the past two months and the challenges involved, what recommendations do you have to achieve the inflation control target this year?

I believe that the Government and relevant ministries, departments, and localities need to implement solutions to ensure sufficient supply at stable prices for food and foodstuffs. In addition, there should be plans and solutions to ensure national energy security. The Ministry of Industry and Trade should promptly monitor world oil prices, improve its forecasting capacity and quality, and develop comprehensive solutions to ensure sufficient supply and increase oil reserves to meet the needs of the economy. Simultaneously, it should forecast, plan, and implement solutions to ensure sufficient electricity supply for production and consumption under any circumstances.

Regarding the adjustment of retail electricity prices, I believe that the draft by the Ministry of Industry and Trade (currently seeking opinions from ministries and agencies to submit to the Government the draft Decision on the mechanism for adjusting the average retail electricity price, replacing Decision No. 24/2017/QD-TTg dated June 30, 2017) proposes reducing the time for electricity price adjustments, empowering EVN to adjust electricity prices with a reduction margin of 1% or more, and an increase of 3% to less than 5% within the price range. This solution will help eliminate the current inadequacies in retail electricity prices, gradually moving electricity prices towards a competitive market mechanism, with both increases and decreases. Therefore, EVN must base its decisions on the actual and reasonable cost of electricity production to decide whether to increase or decrease retail electricity prices.

At the same time, it is necessary to carefully assess the impact of price increases for goods and services managed by the State on inflation and economic growth in order to determine the appropriate level and timing of adjustments, meeting the goal of controlling inflation and minimizing the impact on people's lives. Another important factor is that the Government needs to implement flexible and appropriate fiscal and monetary policies to maintain macroeconomic stability.

In addition, effective communication is needed to provide timely, accurate, and clear information about the government's policies and directives; to eliminate and strictly handle misleading information about market prices, preventing inflation caused by psychological factors stemming from false information, especially reducing inflationary expectations before fiscal and monetary policies and wage adjustments.

The business community needs to fully prepare the conditions to boost production and business, ensuring the supply of goods and services to the market. They should proactively update information and accurately forecast market trends to seize opportunities and reduce risks in the context of weak global demand; risks of supply chain and logistics disruptions still exist; focus on investing in and transitioning to renewable energy, thereby reducing costs due to rising energy prices and increasing long-term profits. Furthermore, investments in technology, human resources, and other areas are necessary to improve labor productivity, competitiveness, and growth.

Thank you, sir!

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