Fears of inflation reversal

Associate Professor, Dr. Pham The Anh, Chief Economist of the Vietnam Center for Economic and Strategic Research, warned that overall inflation tends to reverse: core inflation continues to decrease slowly, while general inflation shows signs of increasing again.

Associate Professor, Dr. Pham The Anh, Chief Economist of VESS, shares about the macroeconomic situation

At the sharing session of economic experts on the macroeconomic situation organized by the Vietnam Center for Economic and Strategic Studies (VESS) on the morning of December 9, Associate Professor, Dr. Pham The Anh, Chief Economist of VESS, warned that overall inflation is showing signs of reversing: core inflation continues to decrease slowly, while general inflation shows signs of increasing again. The basic factors leading to this trend are rising fuel, electricity and water prices; rising food prices due to unfavorable weather. Along with that are political conflicts in the world and rising exchange rates.

Looking at the overall picture of 2023, Dr. Pham The Anh said that growth will recover slightly over the quarters but at a low level compared to normal conditions and far below the target.

Domestic consumption growth is weakening. Public investment leads aggregate demand, private investment stagnates. Exports and manufacturing industry have recovered in recent months. FDI continues to show positive signals; however, it is necessary to note that some risks in energy supply, administrative procedures and tax incentives will be lost (when the global minimum tax policy is applied - PV)", Mr. Pham The Anh clearly stated.

The domestic policy trend continues to be to loosen support for growth, however, although monetary policy has not yet reversed, it will be more cautious with inflation.

According to this expert, in this context, fiscal measures should be prioritized, as there is still much room, reflected in the public debt level decreasing and stabilizing at a moderate level. The direct debt repayment obligation compared to the state budget is not too stressful. Foreign public debt is low, interest rates on government bonds are low, and the maturity of government bonds is healthy.

Specifically, along with continued investment in infrastructure, a number of other measures should be considered, including: reducing value-added tax on essential domestic goods; developing social housing to meet real needs. In addition, adding and building new public schools to meet social needs; raising taxable income and/or reducing personal income tax rates...

Proposal to impose a tax of VND5,000/cigarette pack in 2023 and increase by VND5,000 every 2 years

Expert Dao The Son proposed adding an absolute tax rate of 5,000 VND/bag in 2023, and increasing it by 5,000 VND every 2 years.

According to Master Dao The Son, one of the main reasons for the high and slow decline in smoking rates in Vietnam is that the price of cigarettes in Vietnam is still very cheap, and is even getting cheaper compared to income. The tax rate on the retail price of cigarettes in Vietnam is low, accounting for only 38.8% (2020), lower than the average of middle-income countries (59%), lower than most countries in the ASEAN region, and far from the WHO recommendation of 70% of the retail price (WHO 2020).

“The average cost/payment for a pack of cigarettes has remained virtually unchanged over the past 10 years. The price/tax has increased almost insignificantly between 2010 and 2020, despite tax increases in 2016 and 2019. The product market is so diverse, with many cheap drugs, that buyers can easily choose alternatives to maintain the same spending level for their needs,” the expert emphasized.

“With the highest smoking rate among adults and men in the region, it is estimated that each year Vietnam spends about 67,000 billion VND on direct and indirect medical costs due to the burden of tobacco. In that context, tax is the most effective tobacco control measure. Currently, the contribution rate of tax policy in tobacco harm prevention activities is still very low. On the contrary, the price of tobacco products increases slower than the increase in income, the ability to buy tobacco is increasing,” said Master Dao The Son (University of Commerce).

MR. PHUONG

Source: https://www.sggp.org.vn/lo-ngai-lam-phat-doi-chieu-post717619.html