Vietnam's inflation is not a cause for concern, monetary policy should not be too cautious

On the morning of November 10, the University of Economics and Law, Ho Chi Minh City National University and the Ho Chi Minh City Institute for Development Studies organized a workshop on "Inflation, inflation expectations and monetary policy in the new context". Speaking at the opening of the workshop, Associate Professor Dr. Hoang Cong Gia Khanh - Rector of the University of Economics and Law said that since 2019, with the support of Ho Chi Minh City National University, the school has established strong research groups to focus on research topics on sustainable economic and financial development. Some results achieved from the initial research will provide additional scientific basis for monetary policy making in Vietnam in 2024.

Lạm phát Việt Nam không đáng lo, chính sách tiền tệ không nên quá thận trọng - Ảnh 1. — Monetary policy should not be too cautious as inflation in Vietnam is not too worrying.

According to Dr. Nguyen Tu Anh - Central Economic Committee - many countries are decisively using monetary policy to fight inflation. In fact, the increase in money supply was very strong in the previous period, but inflation has hardly been a problem for developed countries in the past 3 decades. Inflation after Covid-19 is a combination of factors including excessive currency growth and cost-push due to limited supply. In Vietnam, inflation is not too sensitive to money supply. From 1996 to now, money supply has increased very strongly but inflation remains low. The growth rate of money supply (M2) compared to GDP growth rate from 2012 - 2016 was also very high at 16.2 - 18.5%/year but did not cause inflation. Money turnover has continuously decreased and is currently around 0.6 - 0.68 compared to 1.2 since 2012.

Increasing money supply in Vietnam seems to have little impact on inflation. Imported inflation is insignificant when world commodity prices in 2020-2022 skyrocketed, the USD appreciated but Vietnam's inflation remained stable. One of Vietnam's typical policies is to suppress inflation by not increasing prices of state-controlled goods such as electricity, water, gasoline, telecommunications, and medicaleducation costs.

"Demand-pull inflation is insignificant. Therefore, monetary policy should not be too cautious. Curbing inflation by tightening monetary policy too much may not be effective. Inflation in Vietnam, if any, is mainly due to input costs such as import prices of gasoline and basic goods. We should not be too concerned about inflation in Vietnam from a monetary perspective. Vietnam is also in a similar situation to other countries, having money but not being able to spend it, money turnover is decreasing and inflation is low. Limiting cost-push inflation requires affecting aggregate supply, not restricting aggregate demand. That is, promoting public investment disbursement, solving problems in the real estate market, and the corporate bond market to unblock this important market, which has the effect of promoting aggregate supply, and reducing costs is a more fundamental way to fight inflation," Dr. Nguyen Tu Anh shared.

At the discussion session, managers and scientists all commented that it may not be until the end of 2024 that positive signals and indicators for Vietnam's economic situation will appear.

Representing the research team of the Institute for Banking Technology Development (IBT), University of Economics and Law (UEL), Dr. Pham Thi Thanh Xuan presented the research results on inflation expectations, including the measurement of perceived inflation, expected inflation, and loss aversion effects in the Vietnamese economy. At the same time, the research team announced the website https://lamphatkyvong.uel.edu.vn/ , an application product within the framework of the key research program of the IBT - UEL Institute. The website has practical application value and has been transferred to the Central Economic Committee for use as a reference channel for macroeconomic management.

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