INTRODUCTORY

In the cause of socio-economic development of countries in the world and in Vietnam,

In the south, rising inflation is a matter of concern in terms of its impact on economic
development. Inflation is one of the indicators to evaluate progress.The economic
development of a country is also one of the obstacles largest in the development of the
country. Inflation is considered as a century disease of the market economy. For our
country, in the development developing a socialist-oriented market economy with
state regulation, The new mechanism will be the environment to promote the
development of the trend-driven economy modern, certainly inherit the achievements
and overcome the past problems. Among them, inflation emerged as a very serious
problem. So the work. Research on inflation, find out the causes and measures to
combat inflation is very necessary and plays a great role in contributing to the
development of the landcountry.
From 1976 up to now, Vietnam has undergone two main development stages
marked by the beginning of doi moi in 1986: the economy changed from planned to
centralization to a socialist-oriented market economy. In all In these two periods,
inflation is always a top concern in the development policies and strategies, especially
in times of high inflation as high as the second half of the 1970s – the first half of the
1980s and re-emerged in 2007 to present.
Inflation in our country in the period of 2007 up to now has had far-reaching impacts
on all sectors area of social life. With the management and administration of the state
has partly prevent and overcome the impact of inflation, the situation is getting better
and better determined. However, inflation has not really been pushed back and is in
danger of returning. Again, it's complicated.
Grasping this special importance, the topic "Causes and solutions to combat inflation
in Vietnam in the period 2007-2012. “Assessment of inflation outlook in 2022 in
Vietnam” addresses two main goals: Understanding and analyzing the causes of
inflation in Vietnam in the period 2007-2012 From there, providing solutions to
improve the problem. inflationary. At the same time, evaluate the inflation outlook in
2022 in Vietnam.
PART 2 – CONTENT
CHAPTER 1: THEORETICAL BASIS
1.1. Concepts of inflation
For inflation, there are many schools with many different approaches
and each school has different theories:
1.1.1. School of money circulation
According to the "monetary circulation" school of inflation (represented by Milton
Priedman) they argue that monetary inflation is putting more money in circulation,
causing prices to rise goods increased. We all know that not any amount of money
increase in circulation at a faster rate than production is also inflation, If the state does
not reduce the gold content or symbolic value in currency to compensate for the
budget deficit. K.Mazx has shown that the thought of abuse The development of this
theory is too simple. Followers of this doctrine have use formal logic to mechanically
combine the phenomenon of increasing the quantity of money with price increases to
derive the economic nature of inflation.
1.1.2. Pull-pull school
The school of demand-pull inflation, represented by J. Keynes, thinks that. Inflation is
"generalized excess demand for money issues outstrips production in a global period".
lead to an increase in the general price level. We are aware that saying inflation is
"generalized excess demand" is incorrect, since during the crisis in the period of
capitalist development despite the crisis of overproduction without inflation broadcast.
In Vietnam in 1991, there was a situation where the supply was greater than the
demand, but there were still price inflation and currency inflation. Although Keynes
went deeper than the inflationist school, Monetary circulation is not taking external
phenomena, not considering the conditions of Inflation is the cause of inflation, but it
is logically wrong to The results of inflation refer to the nature of inflation. Keynes's
concept is still should not be true to the socio-economic nature of inflation.
1.1.3. School of inflation and prices
The price inflation school holds that inflation is an increase in prices. In fact, abuse
inflation is just one of many causes of price increases. There are times when there was
no inflation like: the "price revolution" period in the sixteenth century in Europe, the
flourishing period of a production cycle, the bad years... the price increase is just a
system This is a conspicuous signal of inflation but at times price increases become
cause of inflation. Inflation occurs because of an increase in many things, not simply
due to price increases. So the views of this school were confused between
phenomenon and nature, making it easy for people to misunderstand between price
increases and inflation.
1.1.4. The K. Marx School
K. Marx said that "inflation is the overflow of channels and circulations Excess
banknotes cause prices (prices) to skyrocket and redistribution social products
between classes in the population in favor of the bourgeoisie. Here Marx took a class
perspective to view inflation, which led to people being able to understand that
inflation is caused by the state by the capitalist class, in order to exploit the class again
proletariat. This view can be classified as the "monetary circulation" inflation view.
but this definition is more perfect because it deals with the socio-economic nature of
inflationary. However, it has the disadvantage that inflation is only an economic
category economy of the capitalist economy and have not mentioned the effect of
inflation on an international scale.
These are the views of the main schools of economics. In general the Both views are
incomplete, but some aspects of the two attributes have been mentioned fundamentals
of inflation. Table of inflation is a big issue and to define it requires deep and careful
investment. We can easily accept the view of the price school, (in our country and
This concept is relatively common in many countries. That's because the twentieth
century is century of inflation, inflation occurs almost in the vast majority of countries
where the price increase is a sensitive and conspicuous signal of inflation. Thus, we
will understand simply as "inflation is a prolonged increase in prices, an excess of
coins in circulation, is the government issuing more money to compensate budget
deficit.” Or inflation is a particularly fast and maximum policy of the forms of
redistribution of social and material value that the ruling class use rights to meet
spending needs. But generally inflation is a phenomenon of market economies.
1.2. Inflation classification
1.2.1 Based on quantification
* Moderate Inflation: Also known as single-digit inflation, has an inflation rate below
10% a year. Moderate inflation causes prices to fluctuate relatively. In During this
period, the economy operated normally, the workers' lives were normal Stable
movement. That stability is reflected in: Slow increase in price, deposit interest rate
is not high, there is no situation of buying, selling and hoarding goods in large
quantities
…
It can be said that this is the level of inflation that the economy can accept its
insignificant.
• Hyperinflation: Inflation occurs when prices rise relatively quickly at a rate 2
numbers 1 year. At the low two-digit level: 11.12%, the overall effects negative and
the economy is still tolerable. But when it rises to double digits, inflation will cause
the general price to increase quickly, causing great economic fluctuations, contracts
are indexed. At the time These days people hoard goods, gold and silver, real estate
and never give Borrow money at normal interest rates. Thus, inflation will adversely
affect production and income because its negative impacts are not small. Besides
Hyperinflation is also a threat to the stability of the economy.
• Hyperinflation: 3 digits a year occurs when inflation spikes with Very fast speed,
high inflation rate. The speed and rate of hyperinflation far exceeded Hyperinflation,
it's like a deadly disease, the speed of money circulation tremendous growth, rapid and
unstable price increases, real wages of workers is sharply reduced, currency
depreciates rapidly, information no longer accurate, market factors distort and
production activity The business is in a state of confusion and disorientation.
Summary, Hyperinflation causes life and economy to collapse quickly fast. However,
hyperinflation is very rare.
1.2.2 Based on qualitative
• Equilibrium inflation and unbalanced inflation .
- Equilibrium inflation: Increases in proportion to the real income of workers, increase
in line with the production and business activities of enterprises. Therefore does not
affect the daily life of workers and the background economy in general.
- Unbalanced inflation: The increase does not correspond to the income of workers
motion. In fact, this type of inflation is also common.
• Predictable and unusual inflation
Anticipated Inflation: It is the type of inflation that occurs every year over a period of
time relatively long and steady inflation rate. This type of inflation can be expected
predict its rate in the following years. Psychologically, people was used to that
inflation situation and was prepared in advance. Therefore, it does not cause affect life
and economy.
- Irregular inflation: sudden occurrence that may not have appeared before. Type
This inflation affects people's psychology and life because they have not had time to
like it suspect. Since then, this type of inflation will cause fluctuations in the economy
and confidence. People's trust in the government has decreased somewhat.
For developing countries, inflation is often protracted, so economists divided inflation
into 3 categories with different rates: chronic inflation lasting more than 3 years with
an inflation rate of less than 50% a year, severe inflation usually lasts longer than 3
years with an inflation rate above 50% and hyperinflation lasting more than one year
with an inflation rate of over 200% a year.
1.3 Causes of inflation
1.3.1 Demand-pull inflation
This is the imbalance in the supply-demand relationship. The main reason is
aggregate demand increases too quickly while aggregate supply does not increase or
does not increase in time, In other words, the economy has exceeded its potential
output level. At this time, the demand for money will exceed the limited supply of
goods and will give them an increase in price. In a market economy, labor is also a
service
services, during which time the labor market becomes scarce, so wage increases are
also
part of the inflation process.
When the economy reaches or exceeds its potential output level, an increase in the
level of demand leads to demand-pull inflation. As total spending on C + I + G
increases, spending increases while there is a limited supply of real output, most of the
total
Higher spending leads to higher prices. Therefore, it is the higher demand that pulls
the price higher, that is demand-pull inflation
1.3.2 Cost-push inflation:
The form of cost-push inflation arising from the supply side, due to the cost of
production higher has been passed on to consumers. This can only be achieved in the
period economic growth when consumers are willing to pay higher prices. Another
cost factor is rising raw material prices due to rising exchange rates or limited mining
capacity. Besides, higher import prices are passed on to domestic consumers
It is also a factor that causes inflation. Imports become more expensive when the
domestic dong currency weakens or depreciates against another currency.
1.3.3 Inflation due to high and continuous increase in money supply
From the point of view of economists on the monetary side, when the money supply
increases A prolonged increase causes the price level to rise for a long time and causes
inflation. Can see The threshold to increase the money supply to cause inflation is a
full employment economy. When the economy If not fully utilized, the source of raw
materials is still abundant and not yet exploited. There are many closed factories and
enterprises that have not yet come into operation. Therefore staff large idleness and
high unemployment… In this case, when the money supply increases leads to a
decrease in interest rates to some extent, investors find that it is possible Profitable
and high investment. Since then, factories and enterprises have opened their doors to
produce,
business. At this time, raw materials began to be exploited, laborers employment and
output increase. In a full-employment economy, factories and enterprises are operated
at full capacity. raw material resources are exploited to the maximum. Then the labor
force used to the fullest extent and greatly increased production. However The
situation will lead to a few congested channels in the circulation. For example, when
the Factories and enterprises operating at full capacity will lead to lack of energy, lack
of labor, raw materials are gradually scarce ... The role of the government and the
Management must determine which traffic channels are congested and find ways to
open them through it. Otherwise it will cause inflation. At that time, output did not
increase, but the price If inflation increases, inflation will inevitably occur. The case
of an increase in the money supply can be achieved in two ways:
Central banks print more money (when interest rates are low and economic conditions
are good business) or commercial banks with credit cards. In both where more money
is available for residents and costs. In terms of middle and In the long run, that leads
to an increase in demand and for goods and services. If supply does not increase
corresponding to the demand, the excess demand will be offset by an increase in price.
However The price will not increase immediately but it will increase after 2-3 years.
Print money to pay for public spending will lead to severe inflation. In the long run,
the real interest rate (i) and real output (Y) reach equilibrium , that is, (i) and (Y) are
stable. The real demand for money doesn't change, so neither does the M/P change. It
follows that when the nominal quantity of money (M) increases, the price will
increase by the rate corresponding. So inflation is a monetary phenomenon. This is
also the reason why does the Central Bank pay so much attention to this cause?
1.3.4 Other causes
In addition to the main reasons mentioned above, some other causes also cause
inflation. The first can be mentioned is the psychology of the population. When
people If they don't trust the state's currency, they won't keep the money but push it in
circulation by purchasing goods to stockpile or invest in an economic force certain
business ... Thus demand will increase but supply cannot meet the balance by supply
and demand in the commodity market is no longer available and continues to push
prices up high, from which inflation will occur. It can be seen that an increase in
prices causes an increase in consumption This will cause an inflationary spiral.
Second, a budget deficit can also be
a cause of increased money supply and high inflation. When the government runs into
a budget deficit, it can be overcome by how to issue government bonds to borrow
capital from the people to offset the shortage. This measure does not affect the base of
the money and therefore does increase the money supply and not cause inflation.
However, when the deficit serious and prolonged, the government must apply
measures to print money. Issuing money will affect the monetary base, increasing the
money supply, pushing up aggregate demand high and increase the inflation rate.
However, for developing countries, The issuance of government bonds faces many
difficulties because of capital in the market school is limited. The money printing
method is considered to be the most effective. That's why when The larger and longer
the budget deficit, the more money will increase and the rate cause higher inflation.
As for countries with developed economies, the issuance of bonds bonds are more
profitable. But if this issue is prolonged, the demand for capital will increase and
interest rates rise higher .Now to reduce interest rates on the market Central Bank The
central bank has to buy those bonds again. That way the money supply increases and
it's easier cause inflation In short, if the budget deficit persists, in all cases it will still
work An increase in the money supply and inflation occurs is a certainty.
Another possible cause of inflation is the exchange rate. When the exchange rate
increases The local currency will depreciate. At that time, the mentality of domestic
producers wanted to increase the price of goods in proportion to an increase in the
exchange rate. On the other hand, when the exchange rate increases, the cost of
imported raw materials and goods will increase. Therefore prices of these goods go
up. This is cost-push inflation.
In addition, the reasons are related to government policies, policies Taxes,
unreasonable economic structure policies, imbalance also occur inflation.
1.4 The relationship between inflation and economic growth
In recent times, some economists believe that Vietnam's inflation rate Equal to growth
is good for economic development. Is it inflation? optimal for economic growth?
There is often a certain relationship between inflation and growth. However the level
How cohesive is still a matter of debate. Those are the two sides of society, that is
two problems in the economy. Inflation can be considered as an enemy of economic
growth but it is two problems that always exist side by side. Fixed inflation at Low is
a favorable macroeconomic environment to encourage saving, expand investment and
promote economic growth. Some studies show that inflation affects negative impact
on economic growth when it crosses a certain threshold. And The relationship
between inflation and economic growth is non-linear. The most recent study of
M.Khan and A. Senchadji (2005), the authors have using the most modern analytical
techniques to test the relationship between inflation and growth. Again, the results
show that there is a correlation between them positive and above that level inflation
has a negative effect on growth. A very powerful finding by the authors is that the
threshold is different at different different countries. In industrialized countries, this
threshold is very low, about 1- 3%; in developing countries it is about 7 - 11%. On the
basis of international theory and experience, inflation and economic growth of In
Vietnam in the past time, many economists believe that the optimal level of inflation
of the Vietnamese economy is at 5-7%.
In fact, both theory and practice show a relationship between inflation and economic
growth are both represented by an inverted "U" shape. That means that there exists a
safe inflationary range where inflation and growth are important same-way system. In
that case inflation is the price to pay for growth economy. Loosening fiscal and
monetary policy tends to increase inflation, on the other hand there will be the effect
of encouraging investment, expanding aggregate demand and thus allowing the use of
more efficiently than existing resources and promote economic growth. Too much
water
used this policy for economic growth. Here is the solution to push fast but less
sustainable, it is also known as the "bubble" growth solution shadow" . Too high
inflation will definitely affect economic growth. Developed countries choose the real
economic growth solution, which is based on low inflation base. In a market economy,
if inflation is stable, The efficiency of forecasting is improved. That helps investors to
build develop effective investment plans, and for consumers, they can rest assured to
spend money consumption, do not have to consider other substitutes due to increased
prices. All things that contributes to real growth.
However, it must also be understood that stable inflation is only a sufficient condition
for growth economic growth, and the necessary condition is a matter of government in
developing resources, capital, technology...
CHAPTER 2: INFLATION SITUATION OF VIETNAM IN VIETNAM
PERIOD
2007-2009
2.1. Inflation in Vietnam in the period 2007-2009
In recent years, Vietnam has been impressed by its economic growth rate continuously
high. However, according to the theory of the relationship between inflation and
growth
Vietnam's economic growth is being affected by its great success and his too fast. The
price to pay for high growth is loss macroeconomic stability at least in the medium
term. This is most clearly seen through inflation and the economic situation of our
country in 2008. The year 2008 has gone down in Vietnam's economic history as a
year full of fluctuations and waves in all markets. From domestic market to foreign
market outside, from the market of ordinary and high-class services to the financial
market and the real estate market. Looking back on a stormy year We draw many
valuable lessons for the next stages of development. Progress The period of rapid
inflation (first 3 quarters of the year) Signs of inflation have appeared since June 2007
when CPI in June jumped up 1%, contrary to the price practice of more than a decade.
This signal has been recorded received and processed in a timely manner. However,
due to not properly analyzing the causes of inflation, development, in addition, the
implementation is not serious, so although increasing. Economic growth for the whole
year 2007 was at a high level of over 8.5%, but inflation was also at a record level
record 12.63%.
In the first half of 2008, inflation continuously escalated and surpassed all established
rules for decades, forcing Vietnam to adjust its policy from priority to economic
growth to curb inflation. In the context of high inflation, the growth has lost much of
its meaning. Especially for the poor vulnerable, income mainly depends on salary.
When prices climb. The amount of money each person gets seems to be more due to
sales,
better income or salary than before. But actually they buy less goods and services
because the purchasing power of money has decreased. If not correctly identified and
If there are appropriate measures, the risk of facing hyperinflation will cause Socio-
economic instability is inevitable. After only 6 months, the General Statistics Office
announced that the CPI index had reached 26.8%. compared to June 2007 and 18.44%
compared to the end of 2007. Particularly for commodity groups food and food
increased by 74.3% and nearly 60% respectively. This broke all our projections about
controlling inflation, stabilizing the macro-economy. Can more serious when Vietnam
is an agricultural country with more than 60% of the population and the workforce is
farmers. The dependence of the economy in general and of market prices in particular
on fluctuations in the wage production sector Our country's food is still very large,
although the share of agriculture in GDP fell to only 20%.
Usually in the months near Tet, prices increase rapidly. But 2008 is special More
because after the Lunar New Year, the price is still high, contrary to the laws of
movement of prices in recent times. After more than a decade since 1992, the "ghost"
of inflation seems to be returning and threaten the socio-economic achievements that
our country has achieved. In the first few months of the year, prices increased month
by month. Prices have been increasing continuously push the next month's inflation
higher than the previous month. Compared to December (2007), CPI January (2008)
increased by 2.4%, in February it jumped to 6%, and in March it was 9.2%. Arrive In
April, the CPI reached double digits (11.6%) and in May suddenly increased to 16%.
Inflation peaked at 3.91% in May (2008), coinciding with the rice price point in the
international market at 1000 USD/ton, wage crisis has become a global threat. Even in
a rice exporting power Like Vietnam, rumors of rice shortage have confused many
people
will return to the terrible famine of 1945. As for the authorities, countries due to
incorrect forecasts should ask enterprises to stop exporting even though Rice prices
are very high. Besides, the economic growth rate started to decline while the
investment rate still high. GDP in the first half of the year only increased by 6.5%
over the same period last year, low much higher than the increase in the same period
in recent years. There are bouts of "virtual fever" USD, gold, rice, steel, construction
materials,... Trade deficit increased skyrocketed (nearly 50% of total export turnover).
Stock market bottoms only about of the highest peak is 1173 points, losing all
accumulated points
accumulated over the past 3 years. Gold price sometimes up to approximately 20
million VND/tael, The exchange rate in the market has exceeded 19,000
VND/USD…. Vietnam's economy at the end of May and the beginning of June was
on the brink of crisis with giant "bubbles" about to burst in the financial and monetary
markets,
bank credit market, real estate market. The months 6,7,8 index CPI has reached
dizzying heights of 18.4%, 19.8% and 21.7% respectively. After only the first 3
quarters of the year, CPI exceeded 20%, reaching a record level of 17 years via. That
also contributes to accelerating the rate of currency devaluation: after 3 years (as of
September 2008) the currency has depreciated 48.5% compared to the 2005 base
period.
9 Inflation reduction phase (last 3 months of the year)
In October, November, and December for 3 consecutive months, the prices of many
commodities have leveled off and reduced. CPI also decreased, economic growth in
negative month: -0.19 (month 10), -0.76 (November), -0.66 (December). Inflation rate
from 21.9% at the time September was only 19.89% compared to December (2007),
softening the inflation of the country Vietnam. The reason is that in the first months of
the year food prices, fast-rising food; non-food products, although slow, but still
price increase. By the end of the year, the food supply doesn't seem to increase
anymore
and the graph is a horizontal line. Meanwhile, the price of non-food goods
Food prices decline rapidly, so the overall price growth rate slows down. Besides that
is thanks to the government's measures to curb inflation have worked such as
Resolution No.10/2008/NQ-CP dated 17/4/2008 on measures controlling inflation,
stabilizing the macro-economy, ensuring social security and growth Sustainability
with 8 groups of solutions... We were right when it came to slowing growth and
focusing on combating
inflationary. Success thanks to the anti-inflation system that ensures all-inclusiveness,
close to reason. In particular, we have the power when gathering and mobilizing the
whole system Politics, both peoples and businesses participate in fighting inflation.
In early 2008, to control inflation, the Government used measures to control inflation
broadcast. Entering the last months of the year with market fluctuations
In the country, the global economic crisis broke out at the end of the third quarter of
2008, on 11-12-2008 The Government issued Resolution No.30 on urgent measures
in order to prevent economic decline, maintain economic growth, and ensure social
security festival..
In 2009, our country faced an extremely complicated problem. That's the time
for the first time in 10 years, all foreign currency supply decreased at the same time,
exports decreased, foreign direct investment decreased, tourism decreased and
remittances also decreased... At the same time, all supply decreases, putting pressure
on the economy. With the primary goal of preventing economic decline, maintaining
the growth rate reasonable, maintaining macroeconomic stability… The Government
has drastically implemented the economic stimulus measures worth up to 10% of
GDP. Wide range of policies specifically issued by the Government, including support
for credit interest rates, exemptions and reductions tax, stimulate investment and
consumption demand, create jobs, reduce poverty... Thanks to that in 2009 still
maintain a good growth rate compared to other countries in the region. Economy
Macroeconomic stability is more stable than in 2008 and there are conditions to
recover from the crisis
global economy.
In the first 3 months of the year, although the economy faced many difficulties, the
impact of negative effects of the financial crisis and the world economic recession,
but Vietnam's economy has been many positive results. Typically increase
positive economic growth (while most economies in the world are in recession)
decrease), inflation continued to be kept at a low level. January rose low, February
increased higher with 1.17%, in March it increased slightly by 0.33%, so it should be
calculated for 3 months of increase slower than the same period last year.
The Government's active solution groups have brought positive results in many areas
second quarter month. Some small businesses have access to capital with interest rates
relatively low should revive again. Consumer Price Index CPI for April, May, and
June starts slight increase. According to the General Statistics Office, compared to
May, June CPI in general water increased by 0.55% , higher than the increase of
0.44% in May, 0.35% in April and 0.33% in March. If compared to December 2008,
the price index in June 2009 increased 2.68%. Average price index in the first 6
months of 2009 compared to the corresponding period of in 2008 increased by
10.27%. Although it is only a slight increase, the rate will increase next month higher
than the previous month, showing a continuous upward path in Q2. CPI The increase
in June was due to the price of some essential commodities such as food, gasoline,
fuel… increased quite strongly, leading to an increase in the prices of many goods and
services other service.
With the promotion of monetary easing policies and economic stimulus packages of
the Government, the economic situation has changed positively in the last months
2009. The growth rate in the first 9 months of the year reached 4.56% (the first quarter
was 3.14%, second quarter reached 4.46%, third quarter reached 5.76%), is expected
to be 6.8% in the fourth quarter. Consumer price index in the first 9 months of the
year fluctuated at a low level but tended to increase. Exceeded the market survey
team's prediction (up only 0.3%), September CPI increased 0.62% over the previous
month., compared to December 2008 increased by 4.11% and 2.42% compared to in
the same period last year. So September CPI suddenly increased after many months
increased slowly, bringing CPI up by 7.64% in the past 9 months compared to the
same period last year.
In general, in the first months of 2009 due to suffering the remaining consequences of
In 2008, the economy grew slowly, CPI increased slowly. Mid-year when The
Government's measures to combat the economic downturn bring into play its effects
increasing economic efficiency, CPI also increased rapidly and suddenly. Even after
the Sudden price increase in September many people are very worried about the
possibility of re-inflation. In the fourth quarter, the price growth rate slowed down, so
in general, the inflation rate in Vietnam this year will only be below double digits.
Vietnam's double-digit inflation in 2010 has been officially confirmed. Although the
figure of 11.75% is not too surprising, it still exceeds the target set by the National
Assembly. In general, in 2010, education is the group with the strongest increase in
prices in the CPI basket (nearly 20%). Followed by food (16.18%) and housing -
construction materials (15.74%). Posts and telecommunications were the only group
to reduce prices with a decrease of nearly 6% in 2010. Generally in 2010, the gold
price increased by 30% while the increase of the US dollar was approximately
10%.*2011: Performance CPI changes in the months of 2011. Inflation for the whole
year ended at an increase of 18.13%, recording the "wildness" of cash flow, when it
failed to create a breakthrough in growth but pushed inflation to reach new records.
The signs of regularity are only very faint. The movements of the consumer price
index (CPI) in 2011 stood out in two spikes, coming from new record increases in
April and July. Consumer Price Index January 2011 suddenly decelerated slightly to
an increase of 1.74% compared to the previous month. Many comments at that time
were optimistic that this trend was positive, which could be a favorable opening for a
year in which the Government set its determination to curb inflation from the
beginning, with the "harsh" target of only 7%.
Inflation was pushed up continuously, monthly CPI increased by 2.17% in March.
Before being surprised at the acceleration after the Lunar New Year, CPI immediately
peaked in April at 3.32%, the highest. in the past 3 years. Up to now, CPI has
increased by 9.64% compared to the end of last year, far exceeding the target of 7%,
realizing nearly 5% of inflation at the beginning of the year.
Investor Nguyen Van Trung, at a meeting in October, said that out of about 57,000
businesses registered for business, up to 47,000 were determined to have stopped
operating. Therefore, in the second half of the year, the economy is at the moment of
"faltering" with the chosen path: accepting a reduction in growth to curb inflation.
Therefore, Vietnamese commercial banks have to face 4 problems. problem: the risk
of lack of liquidity; the risk of currency structure deviation; bad debt risk; and the risk
of total outstanding loans to the real estate market. According to Ms. Tran Thi Hang -
Deputy General Director of the General Statistics Office.
Inflation in the first months of 2011 had the following main causes.
Firstly, petrol and oil businesses increased their prices twice (February 24 and March
29), each liter of gasoline increased by about 30%, oil increased by about 38%, which
directly impacted the price index of transportation and transportation groups.
indirectly many rounds to the production activities of other fields.
The second reason is that the price of electricity for production and living was also
adjusted to increase by about 15.3%, applied from 1/3.
The third is the influence of the exchange rate between VND and USD, the sharp loss
of Vietnam Dong in the first 3 months of the year has increased the price of imported
raw materials and materials (in the condition that our country is still too dependent on
imported raw materials). raw materials from abroad to produce goods for export and
domestic consumption). This is the reason why we have a double price increase from
world prices and exchange rate changes.
Fourthly, the impact from the last months of 2010 is that investment spending from
the state budget and enterprises has increased rapidly, making the amount of money in
circulation large.
Fifth is the psychological factor (both consumers and retailers) from the state's
adjustment to increase the minimum wage for the state-owned enterprises and
administrative and non-business sectors from January 1 and May 1, 2011. .
* 2012: The Economic Monitoring Report released by the Asian Development Bank
(ADB) said that the economic growth rate of East Asia will continue to slow down in
2012 when the US and Europe are at risk of falling into recession. recession due to the
debt crisis.
In the report, ADB forecasts Vietnam's economic growth at 5.8% this year and 6.3%
in 2012, down from the 6.5% forecast released by ADB in September. forecast strong
growth when the macroeconomic situation is stable.
Tight monetary policy will slow down economic growth in 2011, but will boost
growth in 2012. According to ADB, Vietnam's economy grew in the first three
quarters of this year with 5.4%, 5.4%, and 5.4% respectively. 7% and 6.1% thanks to
strong growth in industrial output and consumption. Inflation in Vietnam is still above
target level. As of October, Vietnam's inflation year-on-year was 19.8%. Core
inflation was still high due to high price of precious metals, as of October 2011 core
inflation was at 7.7% over the same period last year.
According to ADB, among regional currencies, the VND depreciated the most against
the USD, down 7.2%, causing the current account deficit to widen and reducing
foreign exchange reserves.

2.2. Reason
Inflation in Vietnam in the period 2007-2012 is the impact of a combination of three
types Inflation: monetary inflation, demand-pull inflation and cost-push inflation.
2.2.1 Currency inflation
Domestic credit growth was excessively expanded from 2005 to 2007 and extended
into the first few months of 2008 making credit for the Securities and real estate
speculation is easier than lending used for investment projects, production and
business activities. In just 3 years from from 2005 to 2007, money supply increased by
135% but GDP only increased by 27%, the rate of increase in total means of payment
and credit balance in 2007 doubled compared to 2006. As of December 31, 2007, the
total means of payment increased by 46.7% compared to December 31, 2006. Total
outstanding loans of the economy in 2007 increased by 57.53% compared to 2006.
The cause of credit growth is the total amount The net foreign currency inflow into the
economy increased sharply. Foreign capital sources (direct investment) foreign direct
and indirect, ODA, remittances) have flooded in quite large since 2007 and increased
dramatically from the beginning of 2008. In order to maintain the USD exchange rate,
the state bank increased foreign exchange reserves from 11.5 billion USD (2006) to
21.6 billion USD (2007). and push a large amount of money into the market.
Meanwhile, on the one hand digestibility
The domestic production is still low, the domestic production capacity cannot keep up
excess money in circulation. On the other hand, the operation of the house water can't
keep up with the tempo, can't recover the amount of meditation to buy foreign
currency reserves when the inflows of foreign currencies made market operations The
open market is not able to neutralize the “side effects” of foreign currency flows. In
circulation, the money supply exceeds the necessary level while the supply is at rest, it
is inevitable lead to inflation. If the reaction is not timely, to prolong it will produce
high inflation, That is inevitable.
2.2.2 Demand-pull inflation
Due to the excessive amount of money in circulation, the money-goods relationship is
out of balance serious. It is worth noting that fiscal and monetary policy are loosened
many years ago and continued to be eased in the first quarter of 2008. Total
investment of society in 2007 was 493.6 trillion VND, 77% higher than In 2006, the
total state budget expenditure reached 399.3 trillion VND, exceeding about 11.7%
compared to the estimate. State budget deficit 56.5 trillion VND, equal to 4.95% GDP.
Trade balance deficit is 14.12 billion USD, equal to 29% of total turnover export
turnover, up 2.5 times compared to 2006. That leads to public spending and
investment both increase, increasing demand while supply fails to keep pace, leading
to demand greater than supply pulls prices up, causing demand-pull inflation. Not only
that, the economy There are still many inadequacies related to the economic, social
and legal infrastructure The law has increased inflationary pressures. However, it
cannot be denied increasing state investment in sectors that have contributed to
structural transformation economy, creating momentum for sustainable development
in the long term.
2.2.3 Cost-push inflation
First of all, the increase in salary, increase in the price of petrol, electricity and water,
transportation... all appear from the seller's side (due to monopolization, association,
price manipulation, irresponsible to the government and society…) and sometimes
even resonates with the ineffective administration and management of prices by the
state. The synergy of two This factor has created a driving force for production and
business costs to increase, increasing the selling price goods and services. Our
country's economy is facing more trade deficit 20 years ago due to the efficiency as
well as low labor productivity, the ability to digest large capital flow from outside is
still poor…. The situation of trade deficit is still serious in early 2008, thereby creating
conditions for cost-push inflation to explode. The economy is dependent on the
outside, too large a trade deficit will cause price turmoil in the country, especially
when prices in the world market fluctuate strongly. This especially when the price of
crude oil and many key raw materials, iron and steel, fertilizer, petroleum… on the
world market spiked dramatically in early 2008 and then fell strongly since the fourth
quarter of 2008 has caused domestic prices to fluctuate in an unsatisfactory way often.
The price of oil has increased from 53.4 USD/barrel in January 2007 to 89.4
USD/barrel. barrel in December 2007 and reached a new peak of 125.96 USD/barrel
on May 9, 2008.
2.2.4 Other causes
In addition, inflation in our country also comes from the following reasons:
The daredevil mentality is provoked by false rumors and speculation profit. In
addition, natural disasters and spreading diseases have pushed up food and food prices
increased, causing market turmoil. There are even causes that have accumulated for a
long time due to inefficient investment (increased ICOR), which ultimately manifests
in increasing spreads GDP growth and money supply growth have been expanding
over the past 3 years. During a period of two and a half years, from the beginning of
2005 to June 2006, GDP increased by 25% while cash supply for circulation and bank
deposits increased to 110%.
2.3. Impact of inflation
2.3.1 Impact on the economic situation
* The field of currency and credit: For banks doing business in the field of currency,
inflation increased, the purchasing power of money decreased, which adversely
affected the capital mobilization, lending, investment and performing banking
services.
- For capital mobilization activities: due to high inflation, the capital mobilization of
Banks face many difficulties. To raise capital, or not want capital from each bank we
run to other banks, we must raise the deposit interest rate closely related to capital
market movements. A race of deposit interest rates unexpected at most banks (17% -
18%/year for weekly or month), always create a new deposit interest rate level, and
then continue to compete to push deposit interest rates go up, some banks bring
deposit rates close to credit interest rates Banking business suffered a big loss but still
carried out, causing instability for the commercial banking system.
- Inflation increased, the State Bank had to tighten monetary policy to reduce the
amount of money in circulation, but the need for loans of businesses Businesses and
individuals are still very large, banks can only meet a few customers with signed
contracts or real projects effective, with acceptable level of risk. On the other hand,
due to high deposit rates, loan interest rates are also high, which has worsened the
investment environment of banks, moral hazard will appear.
- Liquidity of affected banks, term risk and exchange rate risk occurred because the
purchasing power of Vietnam dong decreased, the price of gold and foreign currencies
increased, the Raising capital with a term of 6 months or more is really difficult for
each bank customers, while the demand for medium and long-term loans for
customers is very large, Therefore, the use of short-term capital for medium and long-
term loans in the past time in each bank is not small.
- Due to high inflation, many businesses and people make goods transactions goods,
pay each other directly in cash, but cash is scarce. According to a survey of the World
Bank (WB), in Vietnam, about 35% of money circulating outside the bank, over 50%
of transactions are not through the bank, in that over 90% of the population does not
pay through banks. Volume of money in circulation In addition to large banks, the
State Bank has difficulties in controlling of this cash flow, commercial banks also
have difficulty in the development of non-credit services, especially payment services
via bank row. Thus, high inflation has weakened or even disrupted capital markets.
have a major impact on the operations of the NCBs. Price volatility, including
including the cost of capital, has reduced the confidence of investors and the public,
causing difficulty in choosing the decisions of customers as well as financial
institutions main - credit.
* Manufacturing sector: High inflation has made input and output prices of Raw
materials and products fluctuate constantly, creating instability in the industry market,
causing significant difficulties for Vietnamese enterprises. Than In addition, high
prices will increase production and business costs, affecting the ability to
competitiveness of businesses and the economy as a whole. According to the Ministry
of Planning and Investment, out of a total of nearly 350,000 Vietnamese enterprises,
Currently, about 95% are small and medium enterprises. According to the Association
of Small and Medium Enterprises, about 20% of businesses can hardly continue to
operate. Outside of this group, 60% of association members are affected of economic
difficulties, so production declines. Inflation is doing companies Uncontrollable costs,
loss of market, and insufficient capital to maintain production export. The remaining
20% are companies that have had little impact and are still viable due to less must rely
on loans and be led by experienced leaders. Survey data of the Enterprise
Development Institute under the Chamber of Commerce and Vietnam Industry
(VCCI) shows that, even under inflation conditions, over 90% of non-state-owned
small and medium-sized enterprises still need loans. Although However, just over
10% can borrow 100% on demand. Thus, 80% of businesses Small and medium
enterprises are facing the risk of bankruptcy. Lack of capital, many businesses buy
and sell on credit, sell on credit, increase payment debt, exit outside of operations. The
economic growth rate is generally lower than in 2007, the growth rate growth of GDP
components also decreased compared to the previous year. In particular, speed The
increase in fixed asset accumulation has decreased sharply from 24% to only 4%.
While As a result, the share of inventories increased by 5% to total GDP, higher than
the average level usually about 2% of previous years.
* Circulation field: Inflation soars to 23%, reducing the value of money domestic.
High inflation encourages speculative investment activities profit rather than invest in
productive activities (for example, when there is inflation, If banks do not increase
deposit interest rates, people will not deposit money at banks goods that seek to
speculate on land, causing land prices to rise...). Main These initial activities make the
market even more scarce leading to a supply-demand imbalance.
In 2007, the price of food and foodstuffs on the Vietnamese market increased to
18.9%, much higher than the inflation rate of 12.63%, of which the food group by
15.5% and food by 21.16%. Items such as equipment and utensils household prices
increased by 8.36% compared to 2007, the price of garments increased by 9.81%,
especially Especially in the field of housing and construction materials, prices
increased by 22.39% compared to 2007. This situation makes the domestic
consumption of goods show signs weakening.
For commodities that are heavily influenced by psychological factors such as stocks
and real estate, their prices have dropped significantly. Consider the stock market
2008: Continuity of market declines in the past few years the first month of 2008. In
the second quarter of 2008, the stock market just closed Another week of sharp
decline in both scores, stock prices and trading volume. On the Ho Chi Minh Stock
Exchange, there were only 3.5 million units left, half the volume of the recent session
and was valued at VND148 billion. VN-Index over this session awareness about 500
points, down 7.61 points, to 500.33 points. HASTC-Index only 154.23 points, down
3.19 points. As expected, the stock market has down to the "bottom" of 366 points on
June 20.
2.3.2 Impact on social situation:
High inflation not only causes difficulties for rural people but also Even urban
households with a tight salary have to suffer. According to international statistics,
across our country, the rate of poverty or re-poorization is about 50%. Experimental
studies show:
• Rich people often have knowledge and conditions to access financial tools key to be
able to protect themselves against the effects of inflation.
• The poor often have a high ratio of cash to total assets (because they do not have
conditions for converting income into investments that can offset costs caused by
price slippage) should be affected by higher inflation; extramore reliance on
predetermined sources of income such as wages,welfare and social benefits… sources
of income that are not usually available fully and timely calculation of slippage, or not
at all
inflation. Thus, inflation reduces the real incomes and wages of the poor and
contributes to part of the increase in the unemployment rate, when high inflation
erodes the profits of businesses and reduce the incentive to invest. Once investment
falls, the unemployment rate increases and that reduces people's quality of life.
Three groups of people are strongly affected by inflation:
• Retirees: Because the pension is relatively stable and can only be Adjustment
increased slightly after commodity prices increased many times so with meager real
wages retirees often meet very many difficulties when inflation is high.
• Money savers: When inflation is high, the value of the money is decreasing,
everyone tries to consume the money as quickly as possible I have as much as I can,
or exchange it for foreign currency or gold, ... valuable things store longer. As for
those who save money with money, most If it is a long-term deposit, currency
devaluation is a great loss to monetary assets their.
• The poor: These are the most affected people in life Inflation rises due to rising
prices, falling real wages, and rising unemployment high... While the Government's
support policies are not extensive enough to can support and help the poor get rid of
difficulties.
2.3. Solution
2.4.1 2007
In the context of especially fast inflation in June 2007 (CPI price index skyrocketed
to approximately 1% , contrary to the price practice of more than a decade ) . Inflation
signal This was promptly received and handled by the government through directives:
* On August 1, 2008, the Prime Minister issued Directive No. 18/2007/CT-TTg on a
number of urgent measures to curb the rate of market growth.
The Prime Minister requested: to review monetary policies to take appropriate
measures
control the growth of the total means of payment and the level of credit mobilization
use; implement open market operations measures to regulate the amount of money in
circulation communication at a reasonable level; stabilize the exchange rate, the key
interest rates of the Viet Nam dong, don't let any sudden changes in the money
market… Review, concentrate capital invest in important projects; resolutely
implement the capital adjustment of the slow implementation (not immediately
effective) for projects in need of granting. It is necessary to put them into use soon and
bring into full play their high efficiency. Coordinating with the Ministry of Finance
and relevant agencies promptly remove obstacles on mechanisms and policies to speed
up the implementation and disbursement of investment capital sources from each state
budget, contrary to government bonds, state credit and ODA, especially disbursement
of public funds investment process in the field of transport and agriculture; make
capital advances for projects that are having problems with payment procedures
according to the implementation schedule…Continued implementing solutions to
strengthen management and supervision of market activities stock market and regulate
supply and demand of securities, creating favorable conditions for the market stable
and sustainable development of securities; choose reputable companies to release
stocks attract circulation money for production... Strengthen market management,
combat commercial fraud; quality inspection of goods according to announced
standards associated with price listing check, price registration and sale at list price…
* On October 31, the Prime Minister issued Directive No.23/2007/CT-TTg on
increasing strengthen the implementation of solutions to control prices and stabilize
the market in the coming years the last month of 2007 and serving the Lunar New
Year of the Rat 2008. The Prime Minister directs the ministries and branches to
coordinate with the People's Committees of provinces, centrally-run cities and
industry associations continue to to drastically implement management solutions to
maintain macroeconomic balances, decided to implement the solutions in Directive
No.18/2007/CT-TTg dated September 1st 2007 of the Prime Minister on a number of
urgent measures to curb the
Continue to organize the implementation of the Prime Minister's Directive on the
practice of frugality saving, fighting waste, especially saving in consumption
(electricity, gasoline, oil), saving money, savings in production and business costs and
in capital construction; save in organize conferences, end-of-year summaries, meet to
celebrate the new year. The Prime Minister directed the State Bank of Vietnam to
continue implementing synchronously, harmonize solutions to withdraw money from
circulation, restructure State Bank bills countries sell for a short term, buy foreign
currency at an appropriate level to increase reserves State foreign exchange, control
the growth rate of total means of payment at reasonable, not to overvalue or depreciate
the Vietnamese dong.market price increase. The Ministry of Finance continues to
implement the Government bond issuance plan this year 2007, 2008 to participate in
withdrawing money, and at the same time coordinate with the Ministry of Planning
and Investment, ministries and branches take measures to accelerate disbursement for
projects investment by the State to enhance the ability to absorb capital for the
economy. The Ministry of Finance shall coordinate with the Ministry of Industry and
Trade, the Ministry of Construction, the Ministry of Health and the local government
methods to strengthen inspection, control and price management of trending items
such as: petroleum, real estate, medicine, iron and steel, gas; direct the Local
authorities promote control of price management, do not let monopoly situation price
enterprises, unreasonable valuations, price hikes, failure to list price list; resolutely
handle strictly and promptly according to regulations the violations of the law Price
order. The Prime Minister also requested ministries, branches and people's committees
of provinces and cities to under the Central Government has a plan to prepare a
sufficient quantity of necessary goods at a low price stable to serve the needs of the
people to celebrate the Lunar New Year of the Rat happily, safelyand economical.
Directed by the Ministry of Information and Communications. Mass media agencies
coordinate with ministries and agencies to well carry out propaganda to businesses
and
Consumers understand and agree with the price market management measures from
the State, thereby preventing the psychological impact of pushing prices up. But these
economic policies do not seem to have solved the root cause of inflation Inflation and
inflation have not been controlled and are moving at a high level.
2.4.2 Year 2008
In the context that the economy continues to have high inflation, the state bank (SBV)
has actively implemented the withdrawal of money from the economy through tools
such as: increase by 1% of the compulsory reserve ratio (Decision No. 187/QD-
NHNN
) on January 16, 2008; Compulsory issuance of SBV bills of VND 20,300 billion term
1 year, interest rate 7.8%/year (Decision No. 364/QD- NHNN) dated 13/2/2008.
Special
In particular, the State Bank has flexibly managed the direct interest rates and
innovated the mechanism interest rate management, including a combination of direct
measures is the regulation of interest ceiling according to the company Power No.2 to
quickly stabilize the money market, which was disturbed by the race for interest
capacity.
And the government made a pretty decisive decision when issuing Resolution No
10/2008/ NQ-CP dated 17/4/2008 on measures to control inflation and stabilize
macroeconomic, social security assurance and sustainable growth with 8 groups of
solutions
France:
• Tightening currency
• Fiscal tightening through review of State investment cuts
• Increase supply
• Reducing trade deficit
• Promote savings
• Strengthen market management, price
• Support social security programs
• Promote information and propaganda to stabilize psychosocial and limit inflation
expectations
Tightening monetary policy
The government has chosen monetary policy as the focus for controlling inflation.
As follows:
In May 2008, virtual demand for USD increased due to good psychology and
investment behavior. The opportunity for the price of USD/VND on the free market to
increase dramatically, sometimes up to 19000VND/USD. The State Bank has actively
and flexibly managed the exchange rate: exchange rate margin VND/USD is eased ±
0.5% ± 0.75%Ʊ 1%Ʊ 2% Ʊ 3% dong also intervened to buy and sell in the
foreign exchange market to stabilize the exchange rate and respond to meet the
demand for foreign currency for the import needs of essential commodities (gasoline,
oil, medicine, fertilizer,...); announced foreign exchange reserves of 20.7 billion
USD,intervene in the foreign exchange market, promulgate regulations on foreign
currency exchange, supervision closely monitor foreign currency trading activities,
prohibit the collection of transaction fees, prohibit
Credit institutions are not allowed to trade USD through currency, in coordination
with otherauthorities conduct inspection and handling of speculative activities in order
to stabilize
Forex market.
From October 2008 to create conditions for credit institutions (CIs) to reduce interest
rateslending rate, maintaining economic growth, the state bank has adjusted down 1%
reserve requirement ratio for deposits in VND and 2% reduction for deposits in
foreign currency (Decision No.2560/QD-NHNN dated 3/11/2008), and at the same
time allow credit institutions to use compulsory bills to participate in transactions in
refinancing, open market, and premature withdrawals. On November 20, 2008, the
State Bank continued to reduce the required reserve ratio by 2% with deposits in VND
of credit institutions (Decision No.2811/QD-NHNN) When the money market
showed positive signs, the State Bank lifted the ceiling deposit rate NVD and replace
the basic interest rate management mechanism, whereby credit institutions fix interest
The business rate in VND for customers is not more than 150% of the interest rate
announced by the State Bank. At the time of implementation of the new interest rate
mechanism, the basic interest rate is fixed at 12% and then adjusted to 14% (June 11),
whereby the SBV's operating interest rates such as discount rates, refinancing rates
also increased (refinancing interest rate increased by 13%-15%/year, discount rate
increased from 11%-13%). At the same time, to ensure the strict implementation of
the profit management mechanism base rate, on June 10, 2008, the Governor of the
State Bank issued Document No 5158/NHNN-CSTT requires credit institutions not to
collect fees related to business activities lending action. Facing the slow uptrend of the
consumer price index, especially -0.19% in October and 0.76% in November, in order
to limit the impact of the crisis. financial crisis and global economic recession,
ensuring macroeconomic stability model to create conditions for credit institutions to
reduce lending interest rates and maintain sustainable growth stable, the State Bank
has reduced interest rates three times from 14%-13%-12%-11%/year, interest rates
refunding from 15%-14%-13%-12%/year, discount rate from
13%-12%-11%-10%/year.
At the same time, the State Bank issued Official Letter No.10259/NHNN-CSTT dated
20/11/2008 on the implementation of credit measures and interest rates ; in which the
SBV requires the Credit institutions:
• Adjusting VND trading interest rates in accordance with regulations of the State
Bank, ensure the ability to mobilize capital, safe and effective business activities .
• Concentrating credit capital for agricultural and agricultural production sectors
villages, import and export of essential goods, small and medium enterprises ,
production and business investment projects and even real estate investment projects
feasible, effective and able to repay on time.
• Actively implement measures to ensure safety and effectiveness of operations
Business
• Besides, the State Bank has strengthened control over the credit growth rate and total
means of payment, thereby directing credit institutions to adjust their plans business
plan in line with the policy of inflation control of the government, strictly control
high-risk lending sectors such as investment loans , securities trading , investment
loans , real estate business . Practice support key areas to maintain stability and
growth economy, especially export, agriculture and rural areas.
• Besides monetary policy, the government also tries to reduce trade deficit and
strengthen propaganda on savings, support social security, ...... Savings in regular
expenses nearly 3 trillion dong . Sectors, levels and state-owned enterprises have
strictly followed the direction of Government on saving 10% of recurrent expenditure
in 2008 (except for related to workers).
Up to now, according to reports of ministries, branches and localities, about VND
2,700 billion, equal to 25% of the total state budget reserve in 2008, of which the
Ministries and sectors save about 700 billion VND, localities save about 2 trillion.
This savings is added to the main source of performance social security book;
preventing, combating and overcoming natural disasters, epidemics and other tasks.
Report on reviewing the direction and administration of the first 6 months of the year
and public programs The Government's last 6 months of 2008 by the Minister,
Chairman of the Government Office Nguyen Xuan Phuc's presentation shows that the
cost for the meeting has been reduced, the application of information technology to
serve the direction and administration of the Government The government has made a
new development step and brought into play. Public email system Government duties
have been approved by members of the Government, leaders of ministries and
localities
method of effective use in working relations, information exchange, reporting for
directing and operating activities. Prime Minister, Deputy Prime Minister, Leaders of
ministries have successfully conducted many conferences and teleconferences online,
contributing to improving the efficiency of directing, operating and saving State
budget.
Postponing and delaying the progress of nearly 2,000 projects and works. The review
of works, projects, investment project lists using capital from State budget sources
need to postpone or delay the progress Ministries, branches and localities strictly
implement. Accordingly, the total number of works and projects postpone, stop the
implementation and delay the implementation in the plan In 2008, there were 1,736
projects, with a total capital of VND 5,625 billion. In which, the total number of
reduced-adjusted projects of state-owned groups and corporations 290 projects with a
total capital of 4,775 billion VND. Strictly control imports, reduce trade deficit The
Ministry of Industry and Trade and the Ministry of Finance have actively reviewed
related administrative procedures related to export activities, especially customs, tax...
Deployment study and build technical barriers and measures in line with commitments
international to reduce trade deficit. Regarding export management, functional
ministries and branches have implemented policies to increase total export turnover, in
which, continue to export rice to ensure food security food security and world rice
price stabilization. Based on actual balancing ability and ensure domestic food
security, this year our country can export rice from 4 to 4.5 million tons.
Due to the direct impact of some import restriction policies such as tax increases
import cars, auto parts...; strictly control foreign currency sources for imports, so
Imports are on a decreasing trend, especially imported goods non-essential (in the first
quarter of 2008, the trade deficit was equal to 62.7% of export turnover, in the second
quarter of equal to 39.2%, in June alone, equal to 23.6% of export turnover).
Boost production and ensure the balance of supply and demand Overcoming the
consequences of natural disasters and epidemics has been actively implemented to
promote strong agricultural production. Recently, the Ministry of Agriculture and
Agricultural Development. The village has well implemented policies to restore rice
production in the winter-spring year 2007-2008 and livestock production of buffaloes
and cows were damaged due to the impact of severe cold spells harmful.
Ministries and local branches have actively removed difficulties and obstacles related
to administrative procedures for the development of production and business. Through
the implementation of the above solutions, production and business activities are
improved maintained well, prices of key commodities in the market were basically
stabilized, especially timely hot prices of rice and cement; basically ensure the supply
- demand of the items on the market; contributing to GDP growth the first month of
the year (6.5%) in the context of the world economic situation facing many difficulties
towel.
Granting more than 7,300 billion VND to implement social security policies In the
past time, ministries, branches and localities have urgently, actively and promptly
Time to solve the situation of hunger, support production, living and living for the
poor households of ethnic minorities, households subject to policies and difficulties;
Kepp stable tuition and hospital fees; continue for students, university students,
colleges, school occupations with difficult circumstances may borrow capital for
study; increase the level of insurance support health insurance for the poor; ensure
supply - demand of essential goods people service. Up to now, the central budget has
allocated more than 7,300 billion VND to implement implement social security
policies.
Achievements in controlling inflation in 2008
- Inflation has tended to decrease, except for May increase by 3.91% due to price
shock rice in April 2008. The CPI price index in the last months of the year was at
low, especially negative GDP in October: - 0.19% and November: -0.76%.
- Total means of payment and credit are controlled in accordance with the target
control inflation; In the first 10 months of the year, the total means of payment
increased by 9.48% equal to half of last year's cycle, credit growth slows down (10
months of growth nearly 18% compared to 2007), thereby curbing aggregate demand
and consumption.
- The exchange rate of VND against USD in the interbank market increased with a
reasonable level, on November 28, 2008: VND 16,483/USD, an increase of 2.76%
compared to the beginning of the year, consistent with in line with the supply and
demand of foreign currency, the requirement of controlling inflation and stabilizing
the macro-economy, together with the mechanism to support loans and foreign
currency trading for export allowed payment in foreign currency by export processing
enterprises, control lending in foreign currency to import and intervene to sell foreign
currency to focus on importing items essential goods, contributing to stabilizing the
foreign exchange market and significantly reducing trade deficit.
- Interest rates tend to decrease, after the moves to lower key interest rates of State
Bank, now deposit and lending interest rates of credit institutions have decreased,
creating favorable enabling businesses to access capital more easily Trade deficit has
tended to improve in the last months of the year: Trade deficit level decreased sharply
from an average of 2.4 billion USD/month in the first 6 months of 2008 down on
average 500 million USD/month from July to the end of the year.
- The flow of foreign investment into Vietnam continues to increase sharply: FDI
continues to increase continued to increase, in the first 10 months of 2008 alone,
registered FDI reached 58.3 billion USD, twice as much 5 times over the same period
in 2007, the implemented capital reached nearly 9.1 billion USD. This is also a double
problem, if domestic production capacity is weak, there is no The ability to absorb all
the capital, it will also be a cause of inflation.
2.4.3 2009
In the context of the world economy's serious decline at the end of 2008 and early
2009, and now the core inflation situation has been contained, priority is given to
boosting growth economic growth is placed on. The government started the "loose
monetary" policies.
The State Bank continuously reduced interest rates and required reserve ratio. From
the beginning of February 2009, the industry Tax focuses on the reduction of 30% of
corporate income tax payable in the year 2009 , extending the payment of corporate
income tax for 9 months for tax Enterprise income from production and business
activities of enterprises small and medium enterprises, specifically corporate income
tax of small and medium enterprises payment extension up to 9900 billion. In
addition, the government also plans to reduce 50% value added tax for 19 groups of
goods and services. The Government launched a stimulus package with a total value
of VND 160 trillion, on January 23, 2009 the government issued Decision 131/QD-
TTg on interest rate support for organizations and individuals borrow capital from
banks for production, according to which the interest rate is supported for businesses
and lenders is 4%/year, with a maximum term of 8 month, starting from February 1,
2009. The state budget is expected to spend about 17,000 billion VND, equivalent to
about 1 billion USD for this stimulus solution, and other packages such as a package
to increase public investment of more than 90 trillion VND, an additional package of
social security of nearly 10 trillion. In terms of the ratio of stimulus packages to GDP
of Vietnam's stimulus packages
among the highest in the world. Thus, a large amount of money is pumped into the
background economy.
After a period of implementation, these solutions have had significant effects Positive
impact on macroeconomic stability: Macro imbalance of the economy expressed
through macro indicators in the first quarter of 2008: The growth rate of the first
quarter was only increased by 7.4%, lower than the increase of 7.8% of the same
period in 2007; imports increase 62.5%, nearly double the increase of the same period
in 2007, the main reason comes from on price and quantity. While exports only
increased by 22.7% - higher than the growth of same period in 2007 but much lower
than the increase in imports leading to import trade surplus increased by 3.5 times
compared to the trade deficit in the first quarter of 2007 and equal to 56.5% of the
value exports of goods; CPI in March/August increased by 2.99% MoM, higher much
higher than the increase of the same period of previous years (March 2004: 0.8%;
March/2005: 0.1%; March 2006: -0.5%; 3/2007: -0.22%, 9.19% higher than the
beginning of the year, over the same period increased by 19.39% ; the money market
shows signs of instability, such as lack of liquidity, increased interest rate competition;
stock market falls sloping sharply, the stock index is from over 1000 points at the end
of the year 2007, only 516 points by the end of March 2008...;
After drastic measures against inflation were implemented, the situation Inflation
decreased gradually, by the end of the first quarter of 2009, inflation was only 11.25%
compared to the same period, much lower than 19.39% in the first quarter of 2008.
But economic growth. In the first quarter of 2009, there was a sharp decline (only
3.9%, exports increased by 2.4%).
And the economic situation in the first quarters showed signs of improvement,
increasing economic growth in the second quarter was higher than in the first quarter,
reaching 4.5%, 6 months was 3.9%; price production value of agriculture, forestry,
forestry and fishery increased by 0.9%, 3.9% and 2.5% respectively.
In the field of industrial production, production value since February 2009, May
higher than the previous month (up 2.5% in March, 5.6% in April, up in May) 7.2%,
up 8.2% in June); The trade deficit in 7 months was only 3.4 billion USD, much lower
much compared to the same period last year; The whole year is expected to have a
trade deficit of less than 10 billion USD, accounting for about 16-16.5% of export
value. Meanwhile, capital inflows
Despite the decline, registered FDI in the first 6 months of the year still reached 10
billion USD and has been resolved budgeted nearly 5 billion USD; remittances also
decreased insignificantly; especially near 2 consecutive month FII net entry, tracking a
day 7 - 8 million; credit market applications do not fall into a state of "freezing" like
countries that have been active, the market. Although the stock market is not really
stable, it has prospered... This is a signal very positive for the market. Particularly in
the banking sector, the Governor of the State Bank (SBV) has deploy, propose
solutions to handle unfavorable developments of the market: monetary policy,
exchange rate are managed flexibly not only ensure the goal of combating the
economic downturn and curbing inflation, but also achieve the goal of stabilizing
financial markets, minimizing
The impact of the global financial crisis on financial market instability main Vietnam.
Especially, the flow of foreign capital into Vietnam tends to decline through direct and
indirect investment channels, remittances, putting pressure on Viet nam prices and
stress on foreign currency supply. Faced with such signals, the State Bank has
implementing many solutions synchronously, on the one hand to correct market
discipline foreign exchange due to a long period of laxity, should have limited the
situation of investment foreign currency hoarding, causing artificial stress on foreign
currency sources; at the same time, handle flexibly and harmonize the relationship
between foreign currency interest rates and VND interest rates to reduce strength
pressure on the demand to buy foreign currency, increasing the demand for loans in
foreign currency of enterprises Karma. Moreover, the SBV had anticipated the
negative effects of the package solution to stimulate demand, when bank credit tends
to increase sharply, the Government of the State Bank of Vietnam closely directed and
provided timely response solutions to prevent that risk, such as strengthening
inspection and supervision of the quality of interest-supporting loans capacity;
directing non-nutrition credit institutions to lower loan conditions, have a plan credit
growth at a reasonable rate, ensuring high efficiency, further tightening the credit
financial law.
As a result, in the first quarters of the year, foreign currency interest rates in the
market were commercial banks (commercial banks) put down quite low compared to
the previous time. Low interest rates on the one hand stimulate the demand for foreign
currency loans. The most obvious is if As of May, foreign currency loans decreased
by 9.55% (compared to the end of 2008), then By the end of the month, it had
increased again (in July increased by 1.2% compared to June) and compared to the
end of the month in 2008 only decreased by 2.32%. On the other hand, low foreign
currency interest rates also cause many people, instead of hoarding foreign currency,
sold foreign currency for local currency to save. Presently Foreign currency hoarding
of enterprises has also decreased considerably. Follow In recent days, the amount of
foreign currency businesses have sold quite a lot. That gives The concurrent solutions
of the State Bank have been effective. But those are only temporary effects and side
effects of the packages stimulus begins to manifest and the risk of inflation may
return, and especially Inflation rose again in June 2009 at the rate of 3.94% compared
to May March 2009 and on December 1 at the press conference to announce the
content of the regular meeting term of the Government, on December 1st, Mr. Nguyen
Xuan Phuc, office manager. The Government said that the Prime Minister has
concluded and decided to decide 131/QD-TTg (interest subsidy) short-term lending
rate) originally planned to be implemented until March 31, 2010 with a support rate of
2% subsidy, will have to cease immediately on December 31, 2009.
Main reason
According to the government, it is no longer relevant to the new developments of the
economy: growth, high credit outstanding. Particularly, the two policies are Decision
443 QD-TTg (supporting interest rates for long-term loans) and Decision 497/QD-
TTg (supporting interest rates for long-term loans). loans to farmers to buy
agricultural machinery and construction materials housing) will continue to be
implemented until the end of next year. The Government continues to allow the
implementation of loan guarantees for medium enterprises and small. The Prime
Minister asked ministries and branches to focus on achieving the following objectives:
ensuring stabilize the macro-economy, do not let inflation return, be flexible in terms
of exchange rate policy. The Ministry of Industry and Trade should focus on boosting
exports, reducing trade deficit, building technical barriers, but not violating WTO
regulations; The State Bank manages the business of gold exchanges and manages
foreign currencies well than.
2.5. Evaluate the solution
2.5.1. Fight inflation by limiting aggregate demand
By implementing tight fiscal or monetary policy, or a combination of both, the
government can intervene to reduce aggregate demand, causing the AD curve to shift
to the left to limit inflation. In addition, income policy through the management of
prices and wages in the economy can also be used as an auxiliary measure. Thus,
when aggregate demand decreases, the AD curve shifts to the left, causing both price
and output to fall.
However, pushing the aggregate demand curve to the left cannot immediately stabilize
inflation, but the Government needs to devise policies to shift the aggregate demand
curve slowly and repeatedly. Because all policies contain a certain time lag, when
shifting the aggregate demand curve AD, it is also necessary to consider very carefully
so as not to generate too negative impacts that will have a heavy impact on the
economy such as pushing the country into a recession. severe recession and shortage
of jobs. If that situation happens, the country will face many difficulties to revive the
economy as before.
2.5.2. Fight inflation by increasing aggregate supply
We can do this in one of two ways: cut production costs or increase production
capacity. Either way will shift the aggregate supply curve AS to the right, causing
prices to fall and output in the economy to increase.
In general, measures to combat inflation by interfering with aggregate supply will
bring more positive effects than aggregate demand, but there is a limitation that is
quite difficult to implement. Therefore, most governments sing by operating a tight
fiscal policy.
2.5.3. Fight inflation by operating tight monetary policy
This measure is frequently used by countries. Central banks will be responsible for
implementing this tightening monetary policy by reducing the amount of money
supply in circulation.
When the economy is in a state of high inflation, the central bank must stop all actions
that could lead to an increase in the money supply by stopping the implementation of
tools related to monetary expansion such as discounting for commercial banks, do not
issue more money for circulation or buy short-term securities on the market. Instead,
the central bank will have to use measures to reduce the money supply such as selling
short-term securities, issuing government debt instruments to borrow money from the
people to cover the budget deficit, raising money interest rates. deposit is the savings
deposit interest rate of the population. These measures are very useful because they
work in a short time. This reduces pressure on the prices of goods and services in the
economy.
2.5.4. Fight inflation by operating tight fiscal policy
The government can operate a tight fiscal policy when the inflation rate in the
economy is too high through tightening state budget expenditures. The Government
must be resolute in not spending the budget in excess of the spending estimate
approved by the National Assembly; strictly manage expenditures taken from the state
budget and strictly implement the reduction of unnecessary public investments to
avoid wasting national resources. In addition, the Government needs to clearly and
specifically hand over the reduction targets to each locality and each industry so that
they can understand the directives and strictly implement the policies set out by the
Government.
2.5.5. Controlling inflation from foreign currency trading
It can be said that capital flows in and out of an economy are very difficult to control
strictly. In fact, when there is an inflow of foreign capital into the country, the central
bank will have to take measures to buy into the source.
CHAPTER 4: INFLATION OUTLOOK IN 2022 IN VIETNAM
Assessment of inflation outlook in 2022 in Vietnam
Governor of the State Bank: "Inflation risks in 2022 are very large" Discussing more
about the questions of the delegates, State Bank Governor Nguyen Thi Hong said that
monetary policy must perform two main tasks, is operating to contribute to controlling
inflation, macro and ensuring the safety and affordability of the system. "The
consideration of policy tools in the coming time, the State Bank must base on these
two goals, and at the same time ensure a large balance of the macro," added Ms.
Hong.
With policy room, the Governor said that in 2021, the target of achieving inflation
below 4% can be achieved, but in 2022, inflation risks will have great pressure. When
the world economy has gradually recovered, commodity prices tend to increase, some
commodities such as gasoline have increased very high, many developed countries
have recorded the highest inflation in history. With an open economy like Vietnam,
the pressure of imported inflation risks is huge.
Central banks around the world are also gradually easing policy, according to her
calculations, there have been 65 interest rate hikes, creating operating pressure for
Vietnam in the coming time.
At the same time, if viewed from the second task of the policy, bad debts of credit
institutions are also increasing. Banks reduce interest rates by their own resources, not
from the budget. When bad debts increase, organizations also have to use resources to
handle them
"If the credit institution's resources decline, it will affect the operation and safety of
the system," Ms. Hong said.
Lessons from the 2008-2009 crisis according to her still remain, if not calculated
carefully, the risk of inflation may return.
On the State Bank's side, the Governor said that he would continue to direct efforts to
reduce operating costs to reduce interest rates but must ensure the safety of each credit
institution and system. At the same time, the State Bank will continue to coordinate
with relevant ministries and branches to calculate reasonable interest rate support
packages, on the basis of macro stability, and inflation risk prevention.
Assessing the implementation of the policy from the beginning of 2020, the Governor
said that the pandemic had seriously affected production and business, and the State
Bank in the past time had actively implemented the Government's drastic direction. .
Right from the beginning of 2020, in interest rate management, the State Bank has
reduced interest rates three times, from 1.5-2%. "This is a deep reduction compared to
other countries in the region," Ms. Hong said
In addition to regulating interest rates, the executive agency also directed and called
on credit institutions to reduce even old loans. The lending interest rate has decreased
by 1.66% compared to before the epidemic, with a total interest rate reduction of
about VND 30,000 billion. The bank also reduced fees by more than VND 2,000
billion for customers. By doing this, input costs for businesses and people have been
reduced.
The optimistic forecast of the economy in the fourth quarter of 2021 will increase
from 2-3% over the same period last year and the GDP of the whole year will increase
from 1.6 to 2.1%. However, the price of raw materials, however, materials is
increasing and economic stimulus packages may be deployed in the near future, which
is expected to put pressure on inflation control in 2022, the risk of inflation is not
subjective body.
According to the General Statistics Office, although gasoline prices increased,
consumption increased, causing the consumer price index (CPI) in November 2021 to
increase by 0.32% compared to the previous month, but on average, the CPI in 11
months only increased 1.84%, the lowest in the past 5 years. Notably, core inflation in
November 2021 increased by 0.11% over the previous month (0.58% over the same
last year), the average core inflation in the first 11 months of this year increased by
0.82% over the same period in 2020. Thus, the average core inflation increased lower
than the overall average CPI. This reflects fluctuations in consumer prices mainly due
to increases in food prices, gasoline, oil and gas prices.
Core inflation in November and 11 months of 2021 compared to the same period last
year is the lowest level since 2011. With this result, it is certain that this year's
inflation will be controlled at a low level, about 2%. However, warnings about
inflation will increase in 2022 continue to be given by economists, when commodity
prices on the world market increase and domestic demand gradually recovers,
especially demand for consumption in the coming New Year and Lunar New Year
2022.
Dr. Nguyen Bich Lam, former General Director of the General Statistics Office, said
that due to the sharp decline in aggregate demand in the economy, the consumer price
index this year is low compared to the target of 4%. However, the inflationary
pressure of 2022 on our country's economy is also present. The world prices of raw
materials, goods and services increased; Crude oil prices will continue to rise in the
coming years due to strong demand, limited supply and the crude oil market
experiencing the longest supply shortfall in decades. The lack of upstream investment
in oil production as demand increases is an indicator of high oil prices that persists for
at least the next year.
Our country's economy is highly dependent on imported raw materials, with the
proportion of the cost of imported materials in the total cost of raw materials of the
whole economy being 37%. The cost of petrol accounts for about 3.52% of the total
production cost of the whole economy, especially when the world price of petrol
increases, it will increase the price of imported and domestic raw materials. In
addition, investment and business stimulus packages and support packages also create
great pressure on inflation in 2022.
Regarding inflation risk factors in 2022, Ms. Bui Thuy Hang, Deputy Director of the
Monetary Policy Department (SBV) said that it is expected that inflation in 2022 will
face great pressure, originating from from many factors, including the risk of "import
inflation", the prices of many commodities increased rapidly. Along with that, when
the economy recovers in 2022 under the impact of support packages, which increase
consumption and investment demand. The risk of inflation exceeding 4% depends on
world commodity prices. In addition, the International Monetary Fund (IMF) and
other international organizations have also warned Vietnam about the risk of
"imported inflation" increasing, therefore, in operating monetary policy as well. need
to have necessary scenarios in the direction of tightening in the condition that it is
necessary to control inflation.
Economist Can Van Luc also forecasts inflation in 2022 will be at 3.4-3.7%, although
lower than the target of less than 4%. The risk of inflation risk for Vietnam is present
and under increasing pressure in the context that world prices have not cooled down
soon. The fear of "imported inflation" may push up inflation expectations, especially
in the context that Vietnam is still heavily dependent on imported inputs.g will put
considerable pressure on prices.
Actively prepare enough conditions to promote production and business, ensure
supply and circulation of goods.
Harmonious combination of fiscal and monetary policy.
In order to control inflation, economic expert Nguyen Minh Phong said that first of
all, it is necessary to step up the prevention and control of COVID-19, thereby
stabilizing production, the market, and stabilizing commodity prices. GDP growth will
be an effective support factor for stabilizing the economy, helping to avoid the distrust
of businesses and classes of the population, and avoiding "psychological inflation." At
the same time, the Bank State-owned banks should continue to closely monitor the
world economic situation, actively and flexibly manage interest rates, open market
tools, actively manage and adjust exchange rates, and gradually stabilize and improve
value. VND as a basis for keeping CPI.
In order to control inflation in 2022, Associate Professor, Dr. Dinh Trong Thinh said
that the implementation of fiscal and monetary policies should be carefully
considered, because the large support package will raise concerns about inflation.
Although people now desperately need support packages after the effects of the
pandemic, the support packages and economic stimulus packages must be at an
appropriate level, ensuring the amount of currency circulating in the market at a safe
level. In addition, it is also necessary to calculate not to prolong the support period,
the support package is not too much because this will put pressure on inflation.
In order to promote economic growth in 2022, Dr. Nguyen Bich Lam said that the
Government, ministries, sectors and localities must urgently complete vaccination for
the entire population in the age of vaccination in order to soon achieve the
immunization rate. community translation; give priority to the labor force of
enterprises and individual business households so that these two production areas will
soon return to production and business. In addition, the harmonious combination
between fiscal and monetary policies, focusing on fiscal policies to support enterprises
and individual business households to overcome difficulties. In particular, improve the
efficiency of using public investment capital to create spillovers to private investment
and the FDI sector; exploiting the strengths of signed trade agreements in order to
improve the efficiency of international trade activities and boost exports; enhance
opportunities to attract and utilize FDI inflows.
At the same time, proactively prepare sufficient conditions to promote production and
business, ensure supply and circulation of goods, and reduce inflationary pressure. For
short-term shortage of goods, it is necessary to have policies and solutions to cut
production costs and import raw materials in a timely manner; strengthen inspection,
examination and resolute handling when detecting acts of speculation, hoarding or
manipulating prices. In particular, not to break the supply chain and lack of labor.
Dr. Nguyen Bich Lam, former General Director of General Statistics Office:
Vietnam's economic position in international trade has been strengthened and
confirmed through export turnover of goods. In the context of the pandemic disrupting
the supply chain, many export-producing enterprises faced difficulties in input
materials, high consumption markets, transportation and logistics fees, but 11-month
export turnover reached 299.67 billion. USD, up 17.5% over the same period in 2020;
in which, the export turnover of the foreign-invested sector reached 220.68 billion
USD, up 20%, accounting for 73.6% of the total export turnover of the country.
economy. The import turnover of goods was estimated at 299.45 billion USD, up
27.5% over the same period last year; in which, the import of means of production
was estimated at 280.2 billion USD, up 27.9% and accounting for 93.6% of the total
import turnover of goods. This is a group of goods used in production, creating growth
momentum for the economy. The picture of goods import and export in the first 11
months of 2021 has a spectacular change from a trade deficit of $ 3.7 billion in 9
months to a trade surplus of $ 225 million. The results in foreign direct investment and
import and export activities of the economy show that foreign investors are placing
great trust in Vietnam's link in the global supply chain. The world community assesses
that Vietnam plays an important role in promoting international trade and commits to
expand investment in Vietnam in the coming time.
Strengthen control of essential items
In the context of complicated epidemic developments in recent years, especially in the
southern provinces, the Government has directed ministries, branches and localities to
ensure timely and adequate supply of food, food, and demand. essential for the people.
On that basis, the Ministry of Finance promptly advised and sent documents to the
ministries, branches and localities on strengthening the implementation of price
management and administration, stabilizing market prices; The Ministry of Industry
and Trade has implemented plans to regulate the supply of goods; to solve difficulties
and obstacles in the transportation and circulation of goods in the blocked and
epidemic areas; The Ministry of Agriculture and Rural Development has actively
coordinated with ministries, branches and localities to support the harvesting,
transportation, distribution of domestic consumption and export of agricultural
products. In addition, there is a joint effort and drastic action of ministries, branches
and localities to limit and prevent a shortage of supply in localities affected by the
epidemic.
In particular, essential items such as prices of gasoline, gas, electricity, clean water,
agricultural products, agricultural materials, prices of transportation services,
educational services and textbooks, prices of drugs, materials medical supplies,
epidemic prevention materials, etc., are managed and managed by the ministries and
local branches in a rhythmic and strict manner.
Therefore, although the world price of gasoline increased sharply, the management of
domestic gasoline prices was also adjusted appropriately and flexibly, combined with
the use of the Price Stabilization Fund, so domestic gasoline prices There is no "spill"
increase. In the past 8 months, the Ministry of Industry and Trade has coordinated
with the Ministry of Finance to issue 16 documents on petroleum management, in
which gasoline prices have increased 10 times, 4 times decreased and 2 times kept
stable; Oil price has less number of adjustment times (8-9 times depending on type).
Facing the increasingly stressful situation of the epidemic, the Ministry of Finance
continuously sent an official dispatch to the Ministry of Health requesting the
announcement of market prices of equipment, medical supplies, drugs, and biological
products for SARS testing. -CoV-2, other epidemic prevention and control goods and
services for reference by localities and units in procurement for epidemic prevention
and control on the basis of results of reviewing prices of drugs, equipment and
medical supplies. .. At the same time, the Ministry of Finance issued Official Letter
No. 7656/BTC-QLG dated July 12, 2021 to report to the Prime Minister, in which, it
is proposed to assign the Ministry of Health to regularly update and publicize
information on drug prices. , equipment, medical supplies, SARS-CoV-2 testing
products.... goods and services for epidemic prevention and control
Currently, the Ministry of Health has guided and urged suppliers in the market to
publicize prices of medical equipment. Currently, on the electronic portal to publicize
the price of medical equipment, there are more than 1,600 businesses that have
publicly announced their selling prices (listed prices according to the provisions of the
Law on Prices), and more than 60,000 items of medical equipment have publicized
their prices. (medical equipment 8,256; medical supplies36,191; diagnostic medical
equipment Invitro 15,584) with information on configuration, technical features and
corresponding technical services, warranty and maintenance. To implement
Resolution No. 78/NQ-CP dated July 20, 2021 and Resolution No. 86/NQ-CP dated
August 6, 2021 of the Government on the implementation of urgent measures to
prevent and control the Covid 19 epidemic, On August 16, 2021, the Ministry of
Finance issued Official Letter No. 9335/BTC-QLG to the Ministry of Health
requesting the implementation of a number of contents as a basis for negotiating
prices of chemicals, supplies, equipment and methods. facilities for COVID-19
prevention and control services in the absence of an enterprise announcing prices.
To support some electricity customers in the context of the impact of the Covid 19
epidemic, the Government has issued 02 Resolutions: Resolution No. 55/NQ-CP dated
June 2, 2021 and Resolution No. 83/NQ -CP dated July 31, 2021 on the plan to
support electricity bill reduction, electricity price reduction phase 3, phase 4 for
customers using electricity. At the beginning of August, the Government Office issued
Document No. 5257/VPCP-KTTH to the People's Committees of the provinces and
centrally-run cities directing the adjustment and reduction of the price of clean water
for domestic use and for domestic clean water use. Support for people and clean water
users affected by the Covid-19 epidemic. Currently, the locality is implementing the
direction of the Prime Minister in Document No. 5257/VPCP-KTTH.
Solutions to be taken
In the context of geopolitical tensions in some regions as well as the situation of
strategic competition among the largest countries, especially in the field of trade, it is
forecasted that there will be complicated developments and impacts on the domestic
economy and the task of controlling it. government inflation control. The risk of high
inflation in the world will have an indirect impact on our country when the prices of
many raw materials, fuels and materials continue to be high such as gasoline, gas,
steel, causing the price of imported goods to increase. increase the rate of "inflation
imports". These are the factors that will generally affect domestic inflation.
Forecasting the price situation in the last months of the year, some experts said that, in
the last months of the year, fuel prices (petroleum, LPG) although it is difficult to
increase suddenly because the current price level is already high. As well as the
concern that the virus strains continue to spread more strongly in some countries, there
are also psychological factors that can affect the price level.
Prices of some raw materials are likely to remain high such as iron and steel,
fertilizers due to a shortage of supply in the world. In August, steel prices were
relatively stable compared to previous months but could still increase slightly at the
end of the third quarter and the beginning of the fourth quarter when entering the
construction season.
The price of rice is forecasted to increase slightly in the last months of the year
because the import demand of the main markets remains high. Prices of some
agricultural materials such as fertilizers are forecasted to increase in the second half of
the year, which is a factor affecting inputs of agricultural production.
The price of pork is basically stable, but it is not excluded that it may increase slightly
due to high input factors such as animal feed and breeding stock. However, the price
cannot increase sharply because the supply is still abundant and guaranteed. The risk
of natural disasters, storms and floods may cause the prices of some commodities to
increase locally in certain areas, affecting CPI;
In addition, the cost of circulation and transportation of goods in the world has
increased, affecting the prices of import and export goods, especially for an economy
with a high openness like Vietnam, where growth is mainly weak on import and
export. The potential risk of asset bubbles coming from the real estate and securities
markets without appropriate regulatory measures are factors that indirectly affect
consumer sentiment in general.
In addition, according to Mr. Nguyen Anh Tuan - Director of the Department of Price
Management, pressure from implementing the market price roadmap for some public
services in the coming period, including the implementation of Decree No. 60/
2021/ND-CP on the autonomy mechanism for public non-business units and set the
basic goal of completing the service pricing roadmap in 2021. Accordingly, in the
case of considering an increase in the price of medical examination and treatment
services, step 3, the structure of administrative costs will affect CPI about 0.13%.
In order to control inflation according to the targets assigned by the National
Assembly, Mr. Nguyen Anh Tuan said that in the last months of the year, the
management and control of prices and inflation should continue to be done cautiously
and flexibly. active and active. On the basis of the assessment of the epidemic
situation in the country and the price movements of commodities in the world and in
the country, the Ministry of Finance proposed to implement a number of measures
such as: Closely monitoring the supply and demand movements, the market prices of
the commodities. important and essential goods to take appropriate management
measures. Proactively remove difficulties and have a plan to regulate the source of
goods to increase the supply to epidemic-hit localities requiring isolation or social
distancing, ensuring the sufficient supply of essential goods for the people. Strengthen
inspection and control price market, managing price declaration and listing prices in
accordance with law; Continue to evaluate and update the price management scenario
for the second half of the year to report to the Government, the Prime Minister, the
Deputy Prime Minister-Head of the Price Management Steering Committee,
especially the calculation and adjustment of prices of goods sold by the government.
The management country, public services are implementing a market roadmap to
ensure the target of inflation control and in line with the current complicated epidemic
situation.
In addition, continue to promote information and communication, ensure timely and
transparent information on prices and price management by the Government, the
Steering Committee for Price Management, especially price movements of different
products. Important materials, essential items related to production and people's life to
stabilize consumer psychology and control inflation expectations.
In 2022, most international organizations (IMF, WB, ADB, Citibank...) forecast that
Vietnam's inflation will increase higher than 2021, up to 3.5-3.9% in 2022.
According to our forecast, inflation in 2022 will be at 3.4-3.7%, although lower than
the target of less than 4%, it is a strong increase compared to 2021 and compared to
the global and international averages. ASEAN.
The risk of inflation for Vietnam is present and is still under increasing pressure in the
context that world prices have not cooled down soon, global inflation is still high
(3.3%) in 2022 before cooling down. between 2022 and the following years.
In the country, many pressures cause inflation to increase such as the global CPI
forecast at 3.3% in 2022, higher than in 2021 (3.2%), emerging markets even at 4.1%
compared to the previous year. rate of 3.8% in 2021. The fear of "importing inflation"
may push up inflation expectations, especially in the context that Vietnam is still
heavily dependent on imported inputs.
Besides, the socio-economic recovery momentum and the excitement of production,
business and consumption activities. Demand-pull inflation pressure increased when
the economic recovery momentum led to an increase in investment and consumption
demand, and there was even a phenomenon of "compensating spending"
(compensating for times when social distancing is not entertaining, previous
spending).
In addition, the strong growth of the asset market such as securities, real estate, digital
currency... can spread the price increase to the commodity market because of the
expectation of spending and consuming more when income increases. .
Along with that, cost-push inflation is also under pressure to increase in 2022, even if
the recovery is still slow, because suppliers and sellers may start to increase prices of
goods - goods and services to offset the share. increase in input costs has been
happening.
Not only that, the delay in the impact of the loosening monetary-fiscal policy in the
2020-2021 period will be clearer, the ability to adjust the state-managed goods (such
as electricity, water, healthcare, and education prices) …) may occur, creating
significant inflationary pressure on Vietnam. The strong implementation of the
Economic Recovery Support Program for the period of 2022-2023 will also be a
factor in increasing the money supply and increasing inflation in those 2 years and
possibly the next year.
Even, the risk of inflation if the epidemic situation continues to develop
complicatedly, some regions, provinces and cities have to apply high-level social
distancing measures, disrupting production and circulation of goods. , the local
shortage. However, this situation is unlikely to happen and will soon be overcome in
the general spirit of the next phase of the epidemic prevention and control strategy.
However, the scarcity and imbalance of labor supply and demand, causing some
businesses to increase wages and increase employee benefits, will also be another
cause of inflation.
Inflationary pressure is potential in the long term if the indicators of quality and
growth efficiency such as labor productivity, public investment efficiency, and
economic restructuring are slow to improve. Resources are not used efficiently,
growth below potential, while money supply does not decrease or increase, will also
be factors affecting medium-long-term inflation.
However, Vietnam is still in an active position and has room to control and stabilize
prices and people's psychology, of which four main factors support inflation control as
follows.
First, the growth in world commodity prices is expected to slow down from mid-2022:
the commodity price index is forecast to decline slightly in the period 2023-2025 after
the price shock in 2021 and flat in 2022 when the momentum recovery is more
defined and solid.
Along with that, the problem of energy crisis in the world's leading suppliers of
energy and raw materials such as the US, China, Russia, OPEC, etc. has been actively
focused on overcoming (through diversifying sources of sources). supply, partners,
increase output).
Secondly, the macro foundation is quite solid, inflation is low and the basic exchange
rate is stable, which are positive supporting factors. The major balances of the
economy (public debt, budget deficit, trade balance...) are still being controlled quite
well (despite the heavy impact of the epidemic and the pressure to increase the budget
deficit and public debt). is unavoidable). The exchange rate management policy is
increasingly flexible and proactive, has been helping to stabilize the basic exchange
rate, support macro stability, and curb inflation (the first 10 months of the year, VND
increased by 1.48% compared to USD). and we forecast the exchange rate could
increase about 0.5-1% in 2022).
Third, the coordination between monetary policy, fiscal policy and price is becoming
more and more rhythmic, most clearly showing the coordination in issuing
government bonds as well as neutralizing the amount of money in and out. Inflation
did not spike sharply, both as a result of policy coordination and creating room to
expand at an appropriate level for fiscal and monetary policies in the medium term,
thereby supporting a more sustainable recovery of the economy.
Fourth, the structure of the basket of goods for calculating CPI is increasingly
approaching international standards: the trend of reducing the proportion of essential
commodities such as food and foodstuffs - a group of goods that has a great impact on
the basket of goods for calculating CPI will help stabilize the long-term inflation level.
more determined. At the same time, the stable trend of food and food prices in the
country thanks to proactively abundant supply is also the foundation to resist the
pressure of increasing food and food prices.

CONCLUSION
Inflation policy has always been of prime importance in economic policy of countries
in general and of Vietnam in particular. Continue to improve your goals fighting
inflation and controlling inflation are the basic goals for growth and development
economic development, social stability, industrialization-modernization of our country
next time. Building on the results achieved in recent years, In the coming time, it is
necessary to organize well the following tasks:
* Shifting the economic structure towards sustainability, strongly shifting to the public
sector high-tech industries, supporting and related industries, public service industries
hi-tech and modern. Limit industries that exploit resources that are too large to cause
pollution environmental pollution, processing industries and real estate business.
* Effective management of state investment, especially investment projects
must be carefully appraised, with extensive reference before approval. Perform well
balance revenue and expenditure, avoid high budget deficit, adjust the level of public
spending reasonable, avoid loss in investment, fight corruption, cut down works
inefficient investment.
* Research and propose the implementation of policies and measures to stabilize
prices the whole market, curbing and repelling inflation. Continue to study face
adjustment by price, the price relationship so that it is suitable with the production
situation and production costs, keeping reasonable industrial-agricultural relations, as
well as supply-demand and price fluctuations on the world market.
Inflation is not all bad, but it also has its advantages have
That is, when the economy develops effectively, technical progress is applied actively
If the economic structure is renewed quickly and in the right direction, inflation is a
tools for economic growth, anti-recession. So we need to be restrained Tolerable
inflation or balanced and predictable inflation create conditions to become the driving
force for the development process.