Inflation target is achievable, wage increase expected not to have significant impact on prices

The inflationary pressure is not significant in the second half of this year, Nguyễn Đức Độ, Deputy Director of the Institute of Economics and Finance said. The inflationary drivers in the first half of this year mainly came from the increases in healthcare and education services prices from the third quarter of 2023.

The National Assembly’s inflation target, set at 4-4.5 per cent this year, is achievable, as the wage increases in the public sector are expected not to have significant impact on prices, a conference hosted by the Institute of Economics and Finance has heard.

The inflationary pressure is not significant for the second half of this year, Nguyễn Đức Độ, the institute’s Deputy Director said.

Speaking on Wednesday in Hà Nội, he pointed out that inflationary pressure in the first half of this year mainly came from the increases in healthcare and education services prices from the third quarter of 2023.

Độ said that the impact of the public sector’s wage increases on inflation is expected not to be considerable, as the public sector accounts for less than 8 per cent of the economy.

Overall, if there are no large-scale adjustments in prices of State-managed services, inflation is forecast to be around 3.4 per cent this year, Độ said. The prediction excludes any adjustments in prices of State-managed goods and services.

A representative from the Price Management Department under the Ministry of Finance, said there were no price shocks from the beginning of this year and prices fluctuated following the market supply and demand.

There were increases in food prices, especially rice and pork, but these were under control. Prices of petrol products have been on a downward trend since April, further helping ease the inflationary pressure. The prices of State-managed services were not adjusted in the first half of this year.

For the full year, she predicted that CPI would be controlled and within the Government’s target of 4-4.5 per cent, adding that mild inflationary pressure provides room for the Government to adjust prices of State-managed services including healthcare and non-public education.

The Prime Minister last week issued an official dispatch to ask the management on prices to be enhanced to control inflation and stabilise macro-economy this year.

Still, she urged close watch on the market developments to timely apply price management measures, especially prices of necessary goods.

It is also necessary to choose appropriate points of time to adjust prices of State-managed services to prevent significant impact on inflation.

“Although inflation is still under control, close watch must be on prices developments. We need to promptly provide information and ensure transparency in prices of goods to control any expected inflation,” economic expert Ngô Trí Long said.

The adjustments of prices of State-managed goods and prices must follow a roadmap with careful evaluation of the impacts on inflation to have appropriate adjustments, he said.

Longer term the forecast is that Vietnamese CPI will rise to 4.2-4.5 per cent this year on cooling world inflationary pressures and commodity prices and the Government’s proactiveness in controlling inflation, stabilising the macroeconomy and promoting growth.

However, Lê Quốc Phương, former Deputy Director of Việt Nam Industry and trade Information Centre under the Ministry of Industry and Trade, warned that the price developments in the domestic market are dependent on global developments.

Updates from the General Statistics Office showed that CPI rose 4.08 per cent in the first half of this year.