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Control inflation on average below 4%

08:37 | 25/07/2020

VCN- The consumer price index (CPI) in the first sixmonths of 2020 continuously fluctuated and stopped at 4.19%, quite close to the inflation control target of4% set by the National Assembly and the Government. This is a big challenge for price management in the second half of 2020 when much pressure is on.

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control inflation on average below 4

Pigs, gasoline, gas andrice make it difficult for CPI

Referring to the fluctuations of the CPI, theremust be a mention for the pork problem. Due to the affect of the African swine fever epidemic in 2019, the supply of pork forthe national market has not been able to recover, leading to the unpredictable high retail price of meat. The Government has made efforts, the ministries from Agriculture, Industry and Trade and ministry of Finance have been striving to implement solutions, even proposing businesses promote their sense of responsibility to the community to reduce product supply prices. But the price of pork still "escalates" despite administrative orders. A survey on the morning of July 16, 2020 foundthe meat price of the whole country remained at around VND 81,000-92,000/kg, down 20% from the highest point in April 2020, but could not return to VND 60,000/kg as expected by the Prime Minister and is trending upwards.

Fluctuationwere also recorded with the prices of three important commodities, petrol, LPG and rice. After falling deeply in the first quarter, the price of petrol and oil rebounded following the movements of world prices, specifically; there were fourcontinuous increases in May and June. Similarly, domestic LPG (gas) prices also lower and then started to rise again from May. Rice products are still in an uptrend due to the complexeffects of the Covid-19 pandemic in the world, leading to the demand for this item in the worldto still increase, which is a factor to increase the export price of rice. Besides, demand for some types of medical supplies, preventive and curative medicines for domestic and exportswasstill high, so the prices of these items tend to increase slightly.

From an objective perspective, of the four important items mentioned above (petrol, gas, pork, rice) makes it difficult for CPI mainly due to the influence of supply and demand factors bythe complicated movements of the Covid-19 pandemic. The price increase in January was mainly due to nature of holidays, then shifted the downward trend in the following months due to low market demand during the time of the pandemic and gradually recovered. Return to normal levels when the disease situation is controlled in May and June. This situation is reflected "honestly" on the CPI of the first sixmonths. Compared to the previous month, the CPI of January increased at 1.23%, February decreased by 0.17%, March decreased by 0.72%, April plummeted by 1.54%, May decreased 0.03% and theCPI of June 2020 increased by 0.66%. In general, the average CPI decreased gradually from a high of 6.43% to 4.19% in the first sixmonths of the year, gradually approaching the inflation control target of 4% set by the National Assembly and the Government.

This fluctuation is expected to continue in the last sixmonths. Reporting to the PM at the Price Steering Committee meeting in early July 2020, Deputy Minister of Finance Tran Xuan Ha said the market price is still under great pressure.

The forecast of world petroleum prices in the remaining months of 2020 will have complexand unpredictable developments and will likely continue the uptrend because world oil demand is expected to recover when countriesgradually relaxing measures of social isolation and production restoration, and OPEC + has reached an agreement to extend output cuts until the end of July. However, the instability in the US, recent geopolitical fluctuations in the world and concerns about the second wave of Covid-19 outbreaks in some countries are also factors which have impact on price level.

The consideration of adjusting the ceiling price of passenger transport services on domestic routes will increase the average aviation service price by 4.69%, resulting in overall CPI increase of 0.003%. The prices of educational services (tuition) continue to increase in 2020 according to the roadmap, which will impact the overall CPI of about 0.35%. The price declaration for grade 1 textbooks made in March will impact on the CPI in August and September when preparing to enter the new school year. The impact of the price increase of grade 1 textbooks will cause the CPI in 2020 to increase by 0.02 - 0.04%.

In addition, prolonged hot weather also makes demand for electricity andclean water increase; demand for tourism, entertainment and entertainment; risks of natural disasters and adverse weather. All of these factors may increase local prices of some essential commodities in the affected areas. However, in the opposite direction, the Ministry of Finance also pointed out factors that can help prices "cool down". For example, basic electricity prices are kept stable; the price of paddy rice has been subject to mixed effects due to the impact ofthe EVFTA, which has created a positive motivation for rice export; pork prices may fall due to the additional supply of pork; prices of consumer goods, foodstuff and foodstuffs were basically stable.

Many important documents will be issued

To solve the problem of inflation control, the management, price management andinflation control in the last sixmonths of 2020 will need a great effort, being cautious, flexible and proactive. In particular, continue to follow changes in supply and demand, markets, prices to have a suitable solution to stabilisethe market, especially for some essential commodities. The State Bank of Vietnam continues to operate monetary policy proactively, flexibly, prudently andcoordinating synchronously with fiscal and other macroeconomic policies to keepinflation below 4%, maintain macroeconomic stability, support economic growth, stabilisemoney and foreign exchange markets.

Ministries, branches and localities should strictly control the price declaration work, avoiding unreasonable price increase; intensifying inspection of the observance of law provisions on prices and strictly controlling price constituents of goods and services with prices set by the State, goods and procurement services from the State budget, goods, public services, public non-business services.

According to Nguyen Anh Tuan - Director of Price Management Department, Ministry of Finance, from now until the end of the year, this agency will take charge of drafting and advising the Ministry of Finance to submit to authorities or promulgate according to its competence. Many important legal documents related to price administration workto improve the price legal system. The price management agency will also strengthen inspections; strictly control price constituents of goods and services with prices set by the State, goods and services procured from the State budget. At the same time, strictly control the price declaration of the business andstrictly handle violations.

Noting that controlling inflation from now till the end of the year is relatively favourable, however, Nguyen Thi Mui - member of the National Monetary and Financial Policy Advisory Council, should be cautious because of the upward trend of prices. At the end of the year, the price was still high, from the price of electricity to the price of essential consumer goods such as pork, education andhealth.According to Mui, the key issue in price management, especially the price of agricultural products, is to control more drastically in the intermediate stage. Many items have huge difference between input and output prices; althoughpurchasing price decreased, selling price still did not decrease. The price has been put up in the intermediate stage too much, making the price management measures ineffective.

This expert also suggested focusing on communication issues. "The communication must be clear, concise and accurate. Speak less, but be understandable, all issues must be brief, sharp, it is important people understand it, then it will reassure the people and ensure social security, increasing confidence in the guidelines and policies of the State," Mui said.

By Hong Van/ Bui Diep