Balancing inflation control and economic recovery

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It is necessary to have more key solutions to timely support and avoid the decline of domestic production, especially agricultural production. Photo: N.H

Inflation control is still a priority

Vietnam's GDP growth in 2022 has been continuously raised, while the world and many other countries have continuously lowered their growth forecasts. Most recently, the IMF forecast Vietnam's growth in 2022 at 7% (up from the forecast of 6% on May 16, 2022). Vietnam is highly rated in the ranking of Good Government, achieving strong growth in the income equality index and investment attraction (up 33 places and 18 places respectively compared to 2021).

However, risks and challenges for the economic recovery are still significant, especially the high price of petrol and input materials, which resonates with the recovery of domestic consumption, creating pressure on inflation and increasing production costs. Data from the General Statistics Office shows that Vietnam's inflation in the first seven months of the year increased by 2.54% over the same period last year. Although still under control, according to economic experts, many countries around the world are facing an unprecedented increase in inflation due to rising prices of raw materials and fuels, affecting many commodities.

Meanwhile, Vietnam's economy has an openness of up to 200% of GDP, the situation of imported inflation into Vietnam is inevitable, not to mention the price of many goods has increased rapidly according to the price of petrol, but the price of gasoline has not been reduced in time, also affecting the target of controlling inflation below 4% in 2022.

Therefore, controlling inflation is still a priority, it is necessary to have more solutions to timely support and avoid the decline of domestic production, especially agricultural production, thereby having a knock-on effect on many sectors, economic fields, and people's lives.

Dr. Nguyen Dinh Cung, former director of the Central Institute for Economic Management, said that Vietnam's current challenge is to ensure a balance between economic recovery and inflation control, and to flexibly coordinate between finance and currency policies.

Vietnam still has a lot of room for development, in which the promotion of economic support packages is suitable for digital economic development and sustainable new development. In which, the focus is on socio-economic recovery and development, on the basis of economic recovery to control inflation.

Three reasons to be reassured about inflation

Assessing this issue, Dr. Can Van Luc, chief economist of the Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV), said that inflation pressure on Vietnam's economy comes from five factors including: an increase in price; increase in uncertainties such as wars and epidemics; increasing financial and monetary risks, risks to the banking system when private debt and debt repayment obligations increase; increase in food security and energy security risks; and slowing global growth recovery.

However, Dr. Can Van Luc also said that Vietnam still has three reasons to be assured of inflation in the last months of the year. Firstly, gasoline prices have shown signs of "cooling down", the peak of inflation is also forecast in the second quarter of 2022. In addition, many sources said that next year, gasoline prices will decrease by about 10%, according to which other commodities will "soften".

Global inflation in 2022 is forecast to average about 6%, but in 2023 it will only be 4.5%. The second and third factor for Vietnam to be reassured about inflation is that Vietnam still has a good assurance of supply-related issues and relatively good budget coordination between fiscal and monetary. These are positive supporting factors for Vietnam to control inflation in the last months of the year.

According to Dr. Nguyen Dinh Cung, at this time, the growth target should not be changed and inflation should be curbed. At the same time, when stabilizing the macro economy, Vietnam must implement micro policies, and create favorable conditions for investment and business. Along with that is opening up, integrating and making good use of FTAs.

In order to control inflation and create room for economic growth, Mr. Can Van Luc also said that the Government should soon issue Decree 153/2020/ND-CP amending regulations on participation in the bond market of Vietnam. businesses, because if not issued quickly, the due debt of this group is relatively large, expected to be about VND123 trillion this year, about VND120 trillion in 2023 and about VND230 trillion in 2024, Thus, if credit institutions do not lend because of debt risk and inflation control, many businesses will close, which is extremely dangerous for the economy.

In addition to the above solutions, in order to ensure the continuous supply of domestic consumer goods and control the prices of commodities that have decreased slowly compared to the price of petrol and oil, keeping interest rates unchanged and stabilizing the exchange rate also need to be considered. At the same time, take advantage of opportunities to take advantage of investment attraction and digital transformation to promote sustainable economic development.