Inflation challenges in 2018

Food prices may be one of the factors driving CPI growth in 2018. Photo: H.V.

Many factors put pressure

Forecasting some factors to increase pressure on price levels in 2018, the Department of Price Management, Ministry of Finance said: Currently, there are 18 provinces and centrally-run cities that have not increased the price of medical examination and treatment services for people without health insurance, estimated the total impact on the CPI at about 0.17%. The adjustment of the minimum wage in the calculation of the health service price will affect the price of health services by 4% and the impact on the CPI by 0.14%. In addition, if we do not extend the adjustment roadmap under the Decree No. 16/2015/ND-CP stipulating the autonomy mechanism of public service delivery agencies, the cost of medical examination and treatment will be added to the management fee, which will affect prices in 2018.

Together with health care, the price of education services will also increase 8-10% in the next year and impact around 0.3% on the overall CPI.

Another worrying point is that the electricity price officially rose by 6.08% from December 1, 2017, and is expected to directly affect the 2018 price level of 0.1%, not to mention the indirect impact on the cost of products using electricity as input costs. The adjustment of minimum wage in the region; natural disasters, unfavorable weather affecting food supply and demand; gasoline prices which are likely to increase along with the fact that some services are no longer supported by the State budget due to switching from fees to prices under the Law on Fees and Charges, are all factors that put pressure on the inflation target.

Agreeing with the forecast of the Ministry of Finance, economic expert Ngo Tri Long said that inflation in 2018 will be mainly under pressure from the adjustment of prices of public services and food prices. According to Mr. Long, if public service prices continue to be adjusted according to the 2016-2020 roadmap, it will contribute around 2 - 2.5% to the overall inflation, equal to 2017. Meanwhile, pork prices have rebounded after hitting the "record low" prices in 2017 due to oversupply. After calculating the factors that affect the price level, Mr. Long said 2018 inflation is forecasted to remain low, about 4% for 2018 and 2019.

Can keep inflation at 4%

More optimistically, Dr. Nguyen Duc Do, deputy director of the Institute of Financial Economics, said that inflation in 2018 would be about 2.6%, far from the target set by the National Assembly. According to Dr. Do, inflation in the coming time will remain low and would mainly depend on supply shocks such as oil price, food price, health and education services. However, from 2018, it is unlikely that the Government will drastically adjust the prices of state-managed services by administrative measures, because the price adjustment schedule has basically been completed. It is forecasted that in the first half of 2018, inflation will tend to increase, but then it will decrease at the end of the year. If in the last months of the year, the Government does not adjust the price of services and health, inflation will fall (rise) sharply.

Agreed that the inflation will not be out of control, but Mr. Nguyen Tien Thoa, Deputy Chairman and General Secretary of Vietnam Valuation Association said that we should not be subjective. Mr. Thoa said that the inflation rate in 2017 remained low, in part from the efforts of the Government and authorities at all levels and sectors, it was also from the unchanged commodity prices in the world. Therefore, in order to control the CPI in 2018, in addition to continuing to deal with the deep roots of inflation, by restructuring the economy and reforming the growth model, we must also implement a number of solutions for greater regulation from the first months of the year. The adjustment of market prices for goods and services that is valued by the state such as health and education, must be consistent with the requirements of inflation control and macroeconomic stability in each period. In addition, strengthening the inspection of taking advantage of fluctuations by the market to raise prices, which are detrimental to the interests of consumers, and that must be handled strictly.

Speaking about the solution, the Department of Price Management of the Ministry of Finance has completed the price scenario for 2018. Along with that, it has given specific comments on the price management of essential items, such as food, petrol, electricity, and medical services not covered by the health insurance fund. The roadmap for the price of medical examination and treatment services, and service charges uses BOT (Build-Operate-Transfer) model. Mr. Nguyen Anh Tuan, Director of the Department of Price Management, Ministry of Finance stated: In 2018, in order to keep the average consumer price increase rate of 4%, price management should be very careful. The Department of Price Management, which has a permanent duty to assist the Government's Steering Committee on price regulation, will continue to play a key role in advising the various price management levels and regulators. For essential goods and services, the Ministry of Finance will closely coordinate with the ministries, branches and localities in controlling the increase and selection of the appropriate increase time in order to limit the sudden impacts on the increase of average CPI.

In the immediate future, the Price Management Department will focus on the management and stabilization of prices for the Lunar New Year, 2018, to effectively implement Directive No. 04/CT-BTC of the Minister of Finance on strengthening the work of management, operation and price stabilization during the Lunar New Year, 2018. The Ministry of Finance will organize three price inspection teams in the North - Central - South from January 15 to January 31, 2018. Accordingly, the implementation of Directive 04/CT-BTC of the Minister of Finance will be checked; capture price management in the areas and check the implementation of the price of services transferred from charge to price in accordance with the Law on fees and charges.

With the timely direction of the Government and the entry of ministries, branches and localities right from the beginning of the first month of the year, the target of controlling CPI at 4% can be achieved in 2018. In order to control CPI, the Department of Price Management has proposed synchronous solutions to the ministries, branches and localities to take action, from closely monitoring supply - demand, to increasing inspections and examinations, not allowing the increase in profits to happen, and especially, the smooth implementation of the market route for some goods managed by the State. With the above solutions, controlling CPI at 4% is feasible.