The Hanoitimes - Two scenarios of price management were presented at a recent government meeting for the remaining months of the year, in which both pointed to an inflation rate of 4% at most.
Vietnam still has tools and much room to keep inflation under 4% targeted for this year, said Deputy Prime Minister Vuong Dinh Hue at a recent government meeting on July 10.
Psychological factor is important, said Hue. By excluding an increase in pork prices, Vietnam's inflation rate of 0.27% in June would be predictable and considered the lowest monthly rate in years.
According to the Deputy PM, the anticipated inflation is much higher than the actual rate, while an increase of 0.61% in the consumer price index (CPI), a gauge of inflation, in June had been expected due to a sharp increase in pork prices.
Moreover, the inflation is in line with previous predictions of 0.43% - 0.85%, according to Nguyen Anh Tuan, director of the price management department of the Ministry of Finance (MoF).
The increase in CPI was mainly driven by market factors, including higher animal feed and pork prices (up 0.34%), Tuan added.
At the meeting, the Price Management Department and the General Statistics Office presented two scenarios of price management for the remaining months of the year, in which both pointed to an inflation growth rate of 4% at most.
In the first scenario, inflation rate in 2018 will be in the range of 3.7% - 3.88%. In July, inflation rate will decline by 0.2% compared to previous month, due to reductions in heathcare costs of 0.34% and in petrol and gasoline prices of 1%.
From August to December, inflation rate is expected to reach a higher level compared to previous months, as commodity and service prices will likely see hikes in prices.
In the second scenario, the inflation rate will be in the range of 3.9% - 4%, taking into account a higher level of price increase compared to the first scenario.
Both scenarios are similar to HSBC's recent assessment, which expected headline inflation to average 4% for the current year, in line with the State Bank of Vietnam (SBV)'s target.
Instead of hiking the policy rate, the report stated the government would opt to implement administrative measures to limit inflation.
For instance, government officials have reportedly planned to issue a new circular that would reduce healthcare costs beginning on July 15. The Ministry of Industry and Trade has also issued an order not to raise electricity prices this year.
The report stated a decline in health prices could prove to be significant in curbing inflation, considering that it is the largest contributor to rising prices. However, an actual reduction, not just a halt, in the rise of healthcare costs is necessary to bring inflation down, the report concluded.