Cautious administration of inflation to avoid affecting growth targets

	Inflation still under control
	Experts have high hopes for inflation scenarios
	Inflation in 2019 under the Government’s control

Two gasoline price reductions have "decelerated" somewhat for CPI. Photo: Nguyen Thanh.

Petrol and gas helped to cool down CPI

According to recent statistics of the Price Management Department, Ministry of Finance, in September 2019, the consumer price index increased by 0.32% over the previous month, up 1.98% over the same period last year; increased by 2.2% compared to December last year. Thus, the average CPI of the first 9 months of 2019 increased by 2.5% over the same period last year; while CPI in the third quarter of 2019 increased by 2.23% over the same period last year.

Compared to the previous month, among 11 main groups of consumer goods and services, 8 groups of goods increased. Education increased by 3.15%; food and catering services increased by 0.56%; other goods and services increased by 0.25%; household appliances and appliances increased by 0.13%; housing and construction materials increased by 0.12%; apparel, hats and footwear increased by 0.09%; culture, entertainment and tourism increased by 0.06%; beverage and cigarettes rose by 0.06%; post and telecommunication group unchanged. There are two groups that decreased in price – traffic group down 1.24%; medicine and medical service group decreased by 0.01%.

The reason for the CPI increase is that in September, there were 50 provinces and centrally-run cities raising tuition fees for the new school year 2019-2020 according to the roadmap.Accordingly, the price index of the educational services group increased by 3.53%, increasing the overall CPI by 0.18%. Along with that, African swine fever broke out in all 63 provinces and cities directly under the Central Government. As of September 17, 2019, the total number of pigs destroyed was more than 5 million with a total weight of about 290,391 tons. The decrease in pork supply caused pork price in September 2019 to increase by 2.78% over the previous month, leading to an overall CPI increase of 0.12%. In addition, due to the impact of rain, storms and flash floods, the price of fresh food in some provinces and cities under the Central Government increased, making the price index of fresh aquatic products increase by 0.49% and fresh vegetables increase by 1.16%.

In addition to the causes of CPI increase, there are a number of reasons to curb CPI in September 2019, such as gasoline price adjustment on August 31, 2019 and September 16, 2019. On average in September 2019, gasoline prices fell by 2.79% over the previous month. Or, the domestic gas price has been reduced by VND 3,000 / 12kg tank from September 1, 2019, equivalent to 0.89% compared to August 2019 because the average world gas price in September 2019 announced at 350 USD / ton, down 10 USD / ton from the previous month. Due to the rainy weather, the declining demand for electricity caused the electricity price index to drop by 0.16% from the previous month. Vietnam Railway Corporation reduced train fares by 3.28% over the previous month because by the end of the summer holidays, the price index of public transport services decreased by 0.02% compared to the previous month.

According to Nguyen Anh Tuan, Director of Price Management Department, essential goods and services, basic prices are controlled, without much change. Notably, drug procurement and drug price negotiation have contributed to the decline in prices of this item. Up to now, the Ministry of Health has completed the centralized bidding and drug price negotiation, announced in 2018 and implemented for 2019 - 2020. As a result, compared to the average winning drug price before the concentrated bidding and negotiating national prices, for 25 active ingredients (152 drugs) for centralized bidding, the original brand-name package decreased by an average of 10% (VND745 billion); generic package reduced by over 40% on average (VND1,549 billion). For 4 groups of medicine that negotiated prices, the average price dropped by more than 18% (a decrease of more than VND551 billion). Although the price reduction of these items has not had much impact on the CPI because most of them are not in the basket of goods for calculating CPI of medicine groups and health services, but also contribute to reducing costs for patients.

Control with caution

From now till the end of the year, it is forecasted that some factors affecting the price level such as the electricity price increase in March may continue to impact CPI for the remaining 3 months of the year. Pork prices are expected to continue to increase and there are risks of natural disasters and adverse weather. However, there are still many factors that reduce the pressure on the year-end price level as monetary policy is still being run stably. It is expected that the price of rice will not change much and there is anabundant supply of goods. The regulator has calculated the scenario with an average inflation in 2019 in the range of 2.73% - 2.81%. It is forecasted that CPI in 2019 will increase slower than in 2018, so commodity prices are subject to room for review in the fourth quarter of 2019.

Making recommendations to keep inflation under control in the last months of the year, economist Vu Vinh Phu saidcurrently, the effects of electricity prices, gasoline prices and other goods and services are gradually absorbed into the prices of essential goods. Therefore, it is necessary to carefully control market prices to avoid direct impacts on people, especially workers, the poor and the disadvantaged in society. According to economic expert Ngo Tri Long, factors affecting CPI in addition to market factors are also the administration of the Government and the Steering Committee to manage prices in order to have inflation forecasts. Managing inflation must stick to and support growth targets, avoiding creating inflation expectations or creating lag, putting pressure on inflation in the following year.

Speaking and directing the meeting of the Price Steering Committee at the end of September, Deputy Prime Minister VuongDinh Hue, Head of the Steering Committee, suggested ministries and branches closely monitor supply and demand movements, especially some essential goods.

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"In the context of favorable inflation, ministries and branches continue to adjust the market prices of essential commodities and services that the state has responsibility for price stabilization; proactively calculate the appropriate dosage and the time of adjustment to report to the Steering Board of prices in a timely manner," Head of the Price Steering Committee said.

The Deputy Prime Minister also paid special attention to communication. Accordingly, it is necessary to communicatetopeople and businesses so they trust the administration of the Government and ensure open and transparent market prices to control inflation expectations. At the same time, the Deputy Prime Minister affirmed: “The target of controlling inflation about 3.3% - 3.9% is entirely possible if there are no unexpected changes. Forecasting the CPI at the end of the year, even in the case of rising pork prices and rising gasoline prices,can completely control the CPI in 2019 at a low level, 3.3% - 3.5%, not is the scenario at 3.3% - 3.9% as set out earlier.”