Vietnam may face increased pressure on inflation control: Experts

Inflation in Vietnam may continue to expand in the remaining months of the year as market demand rises, experts said on September 16.

Customers shop at a supermarket in Hanoi. Photo: Cong Hung

The International Monetary Fund (IMF) recently reported global inflation basically showed a sign of peaking in May, except for some specific areas like Europe as the region has suffered from an energy crisis due to the Russia-Ukraine conflict, Can Van Luc, chief economist of the Bank for Investment and Development of Vietnam, told a workshop on inflation, its impacts and policy recommendations for 2022.

In the US, inflation seems to have peaked in recent months, Luc said, citing data of the US authorities that the Consumer Price Index (CPI) has declined to 8.3% in August from 9.1% in June.

Other key indicators of the U.S. economy declined or saw slight increases. The Producer Price Index (PPI) is down to 8.7% in August from 11.3% in June, and core inflation held steady at 5.9% in June and July, before rising slightly to 6.3% in August.

However, the gain of the US core inflation excludes the prices of fuel and foods, which are the two most heavyweights of CPI calculation, Luc said.

Compared to the US, the Vietnamese inflation may go up in the last three months of the year as consumption often increases during this time, the economist said.

To measure the CPI for the year, policymakers should take into account other factors besides the CPI, such as cost-push inflation, monetary and fiscal policies, PPI and core inflation, he said.

Compared with other economies, inflation in Vietnam has a slight lag to rise, and strong market demand in the last months of the year will push inflation up, he warned.

“It may be harder to control the inflation in 2023 as the Vietnamese economy could be affected by the slowdown of global economy, which drags exports and investment back,” he said.

According to the Vietnam Institute for Economic and Policy Research (VEPR), 2022 inflation may be 3.5%-3.8% but pressure will get bigger next year due to geo-political tensions, the tightening of fiscal and monetary policies by central banks, and China’s “Zero Covid” policy.

VEPR Vice Director Nguyen Quoc Viet said that the disruption of the global supply chain and the increases of commodities prices are key reasons to the rise of production inputs and transportation expenses for Vietnamese companies, thus putting pressure on the nation’s inflation.

Viet said that though inflation has been well controlled in the past eight months, the Government needs to take drastic measures to stabilize the macro-economic conditions and prices of goods and services, and develop supportive policies for those suffering from the increase of commodities prices in the fields of transportation and exports.