Concerns about a reversal in inflation trends.

Associate Professor Pham The Anh, Chief Economist of the Vietnam Center for Economic and Strategic Research, advises that overall inflation is trending in a reversal: core inflation continues to decline slowly, while general inflation shows signs of rising again.

Associate Professor Pham The Anh, Chief Economist of VESS, shared his views on the macroeconomic situation.

At a sharing session on the macroeconomic situation organized by the Vietnam Center for Economic and Strategic Studies (VESS) on the morning of December 9th, Associate Professor Pham The Anh, Chief Economist of VESS, warned that overall inflation is trending in a reversal: core inflation continues to decline slowly, while general inflation shows signs of rising again. The fundamental factors leading to this trend are rising fuel, electricity, and water prices; rising food prices due to unfavorable weather conditions; and political conflicts around the world and an increase in exchange rates.

Looking at the overall picture of 2023, Dr. Pham The Anh believes that growth recovered slightly across the quarters but remained low compared to normal conditions and far below the target.

Domestic consumption growth is weakening. Public investment is driving aggregate demand, while private investment is stagnant. Exports and manufacturing have recovered in recent months. FDI continues to show positive signs; however, it is necessary to note some risks regarding energy supply, administrative procedures, and the loss of tax incentives (when the global minimum tax policy is applied - PV),” Mr. Pham The Anh stated.

The prevailing domestic policy trend continues to be easing to support growth; however, monetary policy, while not yet reversed, will be more cautious about inflation.

According to this expert, in this context, fiscal measures should be prioritized, as there is still ample room for maneuver, evidenced by the decreasing and moderately stable level of public debt. Direct debt repayment obligations relative to the state budget are not overly strained. Foreign public debt is low, interest rates on government bonds are low, and the maturities of government bonds are healthy.

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

The proposal suggests imposing a tax of 5,000 VND per pack of cigarettes in 2023, with an increase of 5,000 VND every two years.

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

According to MSc. Dao The Son, one of the main reasons for the high and slow-decreasing smoking rate in Vietnam is that the price of cigarettes in Vietnam remains very cheap, and is even getting cheaper compared to income. The tax rate on the retail price of cigarettes in Vietnam is low, only 38.8% (2020), lower than the average of middle-income countries (59%), lower than most countries in the ASEAN region, and still 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. Prices/taxes have increased only slightly between 2010 and 2020, despite tax hikes in 2016 and 2019. The market offers a wide variety of products, with many inexpensive options, making it easy for consumers to choose alternatives while maintaining the same spending level for their needs," this expert emphasized.

“With the highest smoking rates among adults and men in the region, Vietnam is estimated to spend approximately 67 trillion VND annually on direct and indirect healthcare costs due to the burden of tobacco use. In this context, taxation is the most effective measure to control tobacco use. Currently, the contribution of tax policies to tobacco harm prevention is very low. Conversely, tobacco product prices are increasing at a slower pace than income increases, and the ability to purchase tobacco is growing,” commented Mr. Dao The Son (University of Commerce).

ANH PHUONG

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