BỘ GIÁO DỤC VÀ ĐÀO TẠO

TRƯỜNG ĐẠI HỌC KINH TẾ TP. HỒ CHÍ MINH

BÁO CÁO TỔNG KẾT

ĐỀ TÀI NGHIÊN CỨU KHOA HỌC THAM GIA XÉT GIẢI
THƯỞNG ‘’NHÀ NGHIÊN CỨU TRẺ UEH’’ NĂM 2023

THE CURRENT INFLATION STITUATION IN

VIETNAM.

THE REALITY AND POLICY SOLUTION.

Thuộc nhóm chuyên ngành: 1

TP Hồ Chí Minh, tháng 2/2023

 SUMMARY
Inflation control is one of the most serious issues which is concerned by government
and many scholars in Vietnam. Especially, after the 2008 financial crisis, the inflation
rate in Vietnam increased and fluctuated abnormally. The problem of controlling
inflation in Vietnam have shown that the government is still embarrassed and has not
yet solved the balancing issue between economic growth and price stability. Therefore,
identifying the determinants of inflation in Vietnam is a necessary factor for making
appropriate macroeconomic management policies in the coming time. For that reason,
the research topic is about the current inflation situation in Vietnam, from which to
discover the causes and promptly propose solutions and policies to deal with the ongoing
inflation. The research results show that the determinants inflation in Vietnam are quite
complicated. Inflation in Vietnam is caused by both the supply and demand side.
Thereby, it has shown that in order to control inflation well in Vietnam, it is vital to
closely coordinate between fiscal policy and monetary policy. Besides that the issues
relating to transparency and clarity of policy also helps to reduce the expectations about
inflation.

This study will systematically review the theory of inflation, empirical evidence, and
the relationship between inflation and economic growth, and make some suggestions for
the direction of macroeconomic regulation in Vietnam in the next few years.
 TABLE OF CONTENTS

SUMMARY
TABLE OF CONTENTS
LIST OF ABBREVIATIONS
IMAGE LISTS
HEADING ...................................................................................................................... 1
1. The reasons for choosing the topic……………………………………………….2
2. Research goals and tasks…………………………………………………………..2

2.1. Objectives of the study……………………………………………………. .2

2.2. Research mission……………………………………………………… …2
CONTENT ..................................................................................................................... 3

CHAPTER 1: THEORETICAL BASIS ...................................................................... 3

1.1. Concept and measure ......................................................................................... 3

1.1.1. The concept of inflation and some related concepts ................................... 3

1.1.2. Measurement ............................................................................................... 4

1.2. Inflation classification ....................................................................................... 5

1.2.1. Inflation classification by level: .................................................................. 5

1.2.2. Inflation classification by nature ................................................................. 6

1.3. The reason leading to inflation: ......................................................................... 6

1.3.1. Demand-pull inflation ................................................................................. 6

1.3.2. Cost – push inflation ................................................................................... 7

1.3.3. Inertial inflation ........................................................................................... 7

1.3.4. Inflation caused by structural: ..................................................................... 7

1.3.5. Inflation due to exports: .............................................................................. 8

1.3.6. Inflation caused by imports: ........................................................................ 8

1.3.7. Currency inflation: ...................................................................................... 8

1.3.8. Other causes: ............................................................................................... 8

1.4. Effect of inflation on the economy .................................................................... 9

 1.4.1. The Positive impact ..................................................................................... 9

1.4.2. The negative impact .................................................................................... 9

1.4.3. Impact on economy and employment ....................................................... 11

CHAPTER 2: THE SITUATION OF INFLATION IN THE WORLD AND

VIETNAM TODAY ...................................................................................................... 12

2.1. Inflation situation in the world ........................................................................ 12

2.1.1. In 2021 ....................................................................................................... 12

2.1.2. In 2022 ....................................................................................................... 14

2.2. Inflation situation in Vietnam .......................................................................... 18

2.2.1. In 2019 ....................................................................................................... 18

2.2.2. In 2020 ....................................................................................................... 19

2.2.3. In 2021 ....................................................................................................... 21

2.2.4. In 2022 ....................................................................................................... 24

2.2.5. Inflation forecast 2023 .............................................................................. 27

CHAPTER 3: POLICY SOLUTIONS TO CURB INFLATION .............................. 29

3.1. Government solutions in the short and long term............................................ 29

3.1.1. Situational measures .................................................................................. 29

3.1.2. Strategic measures ..................................................................................... 29

3.2. Monetary policy solutions ............................................................................... 31

3.3. Fiscal tightening policy.................................................................................... 32

3.4. Balance supply and demand in the economy................................................... 33

CONCLUSION ............................................................................................................ 34

REFERENCES ............................................................................................................ 35
 LIST OF ABBREVIATIONS

• ASEAN: Association of Southeast Asian Nations

• BoE: Central Bank's goal
• BOK: Central Bank of Korea
• CLI: Cost of Living Index
• CPI: Consumer price index
• ECB: European Central Bank
• EU: European Union
• Eurostat: European Union Statistical Office
• Fed: President of the US Federal Reserve
• GDP: Gross domestic product
• HSBC: Hongkong and Shanghai Banking Corporation
• Id: GDP deflation
• IMF: International Monetary Fund
• MPC: Monetary Policy Committee
• NBS: General Statistics Office of China
• OBR: Office for Budget Responsibility
• OPEC: Organization of Petroleum Exporting Countries
• PPI: Product price index
• UK: The United of Kingdom
• US: The United State
• WB: World Bank
• WPI: Wholesale Price Index
 IMAGE LISTS

Picture 1: The correlation between population growth and inflation in the long term

Picture 2: Inflation situation in 2019

Picture 3: Average CPI growth rate in 2020

Picture 4: CPI growth rate of the years 2016-2021 (%)

Picture 5: Movement in pork prices, gasoline prices and CPI period 2018-2022 (%MoM)

Picture 6: Gasoline price movement 11 months in 2022

 1

HEADING

1. The reasons for choosing the topic

The market mechanism has been a wake-up call about the change of Vietnam’s
economy since recent decades. In a market economy that is eagerly active and full of
fierce competition in order to gain high profits and keep their firm steady in the business
world. And the economists as well as all businesses should accelerate their approach,
grasp and catch the problems of the innovation economy. Besides the many problems
necessary to run a business, there are other unanswered questions in business. One of
the 21st century phenomena that affects every economy, developed or underdeveloped,
is inflation.

Inflation as a chronic disease of the market economy, it is a pretty complex issue that
requires an investment of both time and knowledge to expect a positive outcome.
Inflation is permanent, if not regularly controlled, there are no regular, timely,
synchronous and effective anti-inflation methods, inflation can occur in any commodity
economy and social system. Anti-inflation is not only the business’s task but also the
government’s responsibility. It’s easy to understand because inflation affects the entire
national economy, social life, especially the labor force in our country today.

The 19th century was marked as having no inflation issue when prices were in a
relatively stable region in spite of destructive fevers. However, aster the first world’s
war, there was a period of increasing inflation on a large scale. Since 1945, there has
been no decline in prices. Besides that, the oil crisis since the 70s has led to a return of
inflation increase. Then, thanks to the efforts of stabilization policies, the deflation
process has started in these 80s. Inflation has caused many disadvantages to the
economy such as: crisis situation, workers strike to get higher wages, sudden increase
in material price, natural disasters, increase in production costs, etc

Our country is in the transition from a materialized economy to a market economy,

so we realize that the research of inflation is one of the most urgent issues in the current
period to assess the health of the country’s economy. Fighting with the inflation in order
 2

to maintain a stable and balanced economy is an important goal in socioeconomic

development, citizen’s living standards.

As students, we use the media to learn and come up with reasonable solutions to
reduce the inflation rate. Therefore, the group chose the topic: The current inflation
situation in Vietnam. The reality and policy solutions.

2. Research goals and tasks

2.1. Target of the study

The target is conducted to understand the current situation of inflation in Vietnam

in order to come up with appropriate solutions to curb inflation to help develop our
country comprehensively.

2.2. Research mission

In order to achieve the above goal, the research process needs to solve the
following tasks:

First, get an overview of inflation.

Second, analyze the current situation, causes and consequences of inflation in

Vietnam today.

Third, offer solutions to curb inflation.

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CONTENT

CHAPTER 1: THEORETICAL BASIS

1.1. Concept and measure

1.1.1. The concept of inflation and some related concepts

There are many different perspectives and definitions of inflation

In economics, inflation is the increase over time in the overall price level of the
economy. In an economy, inflation is a devaluation of the market value and decline
in the purchasing power of money. In comparison to other economies, inflation is a
currency devaluation of one currency against the others. According to the first sense,
it is usually understood as the inflation of a currency unit within the economy of a
country.

Inflation is an objectives economic category arising from the currency in

circulation, which is a phenomenon in circulation that exceeds the necessary needs,
causing them to be devaluation, the prices of most goods increase simultaneously.

Another definition of inflation is given by modern economists and is often used in

the field of market research: “Inflation is the rate of increase in average prices over a
given period of time”.

“Inflation is the increase in the general price level of goods and services over time
and the devaluation of one currency unit. When compared to other countries, inflation
is the decrease in value of one country’s currency relative to the others”. The price
level or price index to evaluate inflation is the following: deflation index, consumer
price index (CPI), product price index (PPI).

Some related concepts:

Deflation: is the phenomenon that the price level of goods and services decreases
in a certain of time.

Decreasing inflation: is the phenomenon that occurs when inflation rate of the
current year considered lower than the inflation rate of the previous year.
 4

1.1.2. Measurement
The inflation situation in a period is mainly measured by an inflation rate. It is the
percentage difference about one of the index mentioned above at two different times.

Inflation rate: calculated as a percentage change in the price level.

Included:
• πt : inflation rate in period t
• Pt : price in desired year t
• Pt-1: price in the previous period
The common measures of the inflation index include::

1.1.2.1. Consumer Price Index (CPI):

The most common and basic measurement index that measures the price of a
selection of goods commonly purchased by the “common consumer”

Note: During the calculation, a number of representative consumer goods must

be selected from which to survey the price fluctuations

𝒎𝒂𝒓𝒌𝒆𝒕 𝒃𝒂𝒔𝒌𝒆𝒕 𝒐𝒇 𝒅𝒆𝒔𝒊𝒓𝒆𝒅 𝒚𝒆𝒂𝒓

Or CPIt = × 𝟏𝟎𝟎%
𝒎𝒂𝒓𝒌𝒆𝒕 𝒃𝒂𝒔𝒌𝒆𝒕 𝒐𝒇 𝒃𝒂𝒔𝒆 𝒚𝒆𝒂𝒓

Included:

• N: number of consumer goods

• CPIt: consumer price index of desired year t

• Pit và Pi0: the price level of good in year t and year 0

• Qi0: the quantity of good in year 0
• Year 0: base year

1.1.2.2. GDP deflation (Id):

The reflection of the change in average price of all goods and services produced in
the current year (year t) compared to the basic year.

Id of year t is calculated as the formula:

 5

• GDPdn: nominal GDP year t

• GDPt: real GDP year t
• qit: quantity of product ì produced in year t
• pit: price of product i of year t
• pio: price of product i in basic year (year 0)

1.1.2.3. Cost of Living Index (CLI):

The theoretical increase in an individual’s cost of living cost, for which the CPI is
approximated.

1.1.2.4. Wholesale Price Index (WPI):

Measuring the change in the price of a choice of wholesale goods (usually before
tax sales). This indicator is very similar to PPI.

1.2. Inflation classification

Based on the characteristics of inflation, the scientists divide inflation by level and
nature.
1.2.1. Inflation classification by level:
Natural inflation (moderate inflation): “Moderate inflation also known as single-
digit inflation. The level of inflation rate below 10%”. In fact, the level given by
moderate inflation has no impact on the economy. Predictive plans are relatively stable
and undisturbed. This stability is manifested: prices increase slowly, low deposit
interest rates, not having any issue of buying, selling and hoarding goods in large
quantities,... It can be said that moderate inflation creates so psychological peace of
mind for employees who only rely on income.“During this time, some business firms
with stable income and low risk should be ready to invest in production and business.
Vietnam’s inflation rate is within a modern inflation rate.”

Galloping inflation: “galloping inflation is also known as double (or triple) digit
inflation. This level of inflation has an inflation rate of 10%, 20% and up to 200%.
Inflation cause increase in price level rapidly, causing great fluctuations in the
economy, some contracts are indexed. At this times, people hoard goods, gold, silver,
real estate and never lend money at normal interest rates. When this level of inflation
 6

lasting, it has a strong impact on the economy, which can leading serious economic
transformations.

Hyper inflation: “ This is a sudden increase in inflation at high speed. This level
of inflation has an inflation rate above 200%”. Hyper inflation occurs when sudden
inflation increases at a high rate that far exceeds galloping inflation, it is considered
as a deadly disease, the speed of currency in circulation increases rapidly, quickly
and unstably rising price, falling real wages sharply, fast devaluation of currency,
inaccurate information, the deformation of market components and business
activities leading to disordered state. However, hyperinflation is very rare. This
phenomenon is not common but it has appeared in history. For example, in Germany,
China, Brazil, ... If in the period of galloping use, the economy is considered to be
going to death. However, hyperinflation is very rare.

1.2.2. Inflation classification by nature

Expected inflation: This type of inflation usually comes from psychological factors,
often predicting inflation over the same period in the past. Expected inflation regularly
does not have any serious effect, only the impact of adjusting production costs.

Unexpected inflation: This type of inflation can not be predicted. Unexpected

inflation usually originates from external factors. Those of economy do not change
unexpectedly such as: epidemics, wars, etc.

1.3. The reason leading to inflation:

1.3.1. Demand-pull inflation
Inflation occurs when the demand of a good increases
dramatically, causing the price of that good to increase as follow.
This leading to the price of other goods in the market increasing as
“chain reaction”. Inflation caused by an increase in market demand
is called demand - pull inflation.

If the demand for goods exceeds the supply, production will not be expanded either
because the use of machinery has reached its limit or as the factors of production can
not meet the increase in the demand. This imbalance will be filled by prices. The
demand - driven inflation or demand - pull inflation was established from that. In United
 7

States, for example, machine capacity utilization is a useful indicator of future inflation
in the United States. Using machinery capacity above 83% leads to increased inflation.

1.3.2. Cost – push inflation

Types of costs in the production process such as: wages,
costs of raw materials, machinery, taxes,...“Once the price of
one or more of these factors increases, it will affect the price
of goods and services to preserve profits for the company. The
increase in the price level of the economy results from the
input costs called cost - push inflation. “

Example: When wages are a significant component of production and service costs.
When wages grow“faster than labor productivity, total costs of production rise. If
manufacturers can pass these cost increases on to consumers, prices will rise, and
workers and unions can demand higher wages than before to match the increased cost
of living, creating a wage-price spiral.”

1.3.3. Inertial inflation

During a period of prolonged inflation (also known as
inertial inflation), the price level rises at a fairly stable and
relatively low rate. This type of inflation can be predicted and
specified clearly in labor contracts, leases, loans, … Inertial
inflation is a combination of demand - pull inflation and cost -
push inflation.“The economy is stable and components in the
economy predict that there will be similar level of inflation, so they wil adjust the
nominal interest rate, wages, prices,... According to the inflation rate of the previous
year, this causes the prices increasing as predicted.”

1.3.4. Inflation caused by structural:

According to market trends, this sluggish manufacturing industry is forced to raise
wages for employees, leading to higher product prices, which in turn leads to higher
product prices and inflation.
 8

1.3.5. Inflation due to exports:

When“exports increase, products are collected for export, resulting in a reduction in
domestic supply.”This creates an imbalance between domestic supply and demand,
leading to inflation.

1.3.6. Inflation caused by imports:

When the price of imported goods rises, the selling price of these goods in the
country will inflate, thereby raising the overall price level of domestic goods, leading to
inflation.

1.3.7. Currency inflation:

The increase in the amount of currency in circulation caused by increased
government spending is offset by money printing, central bank purchases of foreign
exchange, etc., leading to inflation.

1.3.8. Other causes:

Between inflation and interest rates as the inflation rate rises, the nominal interest rate
increases, increasing the opportunity cost of holding money, the more money you hold,
the more you lose. This is especially true during hyperinflation, where money
depreciates faster, increasing the level of deposits in banks, savings or pushing into the
market to buy all kinds of goods that can be stored causing additional loss. The balance
of supply and demand in the commodity market continued to push prices up.

Between inflation and currency when the budget deficit is large, governments can
print more money to cover, the increase in nominal money is a cause of inflation. And
once prices have risen, new deficits arise, requiring new money to be printed and
inflation continues to soar. This type of spiraling inflation usually occurs during periods
of hyperinflation. However, the Government can finance the budget deficit by
borrowing money from the people through the form of bills of exchange and bonds. The
amount of nominal money does not increase, so there is no risk of inflation, if the budget
deficit continues to persist, the amount of money to be paid to the people (both principal
and interest) will be so large that it is necessary to print money to cover it. The possibility
of strong inflation is certain.
 9

1.4. Effect of inflation on the economy

1.4.1. The Positive impact

Inflation does not always cause harm to the economy.“When the moderate inflation
rate is from 2-5% in developed countries and less than 10% in developing countries will
bring some benefits to the economy as follows:”

Stimulating domestic spending. , stimulating businesses to borrow to invest in

production and business to help reduce unemployment throughout the country.

Allow the“Government to have more tools to stimulate investment in weak areas

through credit expansion packages, stimulate consumption, redistribute income and
resources according to the target.”But this is a fairly risky task that requires proactive
and careful preparation because it affects the whole macroeconomic of the country.

1.4.2. The negative impact

Inflation has many types, so there are many different levels of influence on the
economy. From a correlation perspective, in an economy where inflation is considered
a concern of the whole society and one can see its impact. National inflation in the world
when occurring and constant has adversely affected all aspects of economic, political
and social life of a country:

For the field of production: High inflation rate keeps input prices and output
fluctuating, leading to false stability in the production process. The depreciation of the
currency hampers the company's accounting activities. Business Efficiency - Production
at some businesses may change and cause economic disruption. If a company's profit
margin is lower than the rate of inflation, the risk of bankruptcy is high.

Interest rate: The first impact on inflation is the interest rate. We have the formula:
"Real interest rate = Nominal interest rate - inflation rate".“Therefore, when the
inflation rate rises but wants to keep the real interest rate stable and positive, the nominal
interest rate must increase and when the nominal interest rate increases, the consequence
of the economy is degraded and unemployed.”

For circulating fields: Promoting the stored speculation process leading to scarcity of
goods. Businesses find that investing capital in the production sector will face high risks.
 10

Because there are many people involved in this field become chaotic. The money in the
hands of those who have just sold was quickly pushed into the circulation canal, the
speed of currency circulation soared and this promotes inflation increasing.

For the money and credit sector: Credit, trade and banking relations narrow. The
number of depositors in banks has been greatly reduced. Due to the sharp decline in
bank deposits, the banking system cannot meet the needs of borrowers, and the currency
price is too fast, so there is no sense of security in price and interest rate adjustments.
Those who currently have money in their hands are free. On the borrower side, they are
the big beneficiaries as funds are lost quickly. As a result, the banking system no longer
functions properly. The function of money business is limited, the function of money is
no longer intact, because when inflation, no one will store wealth in cash.

For the State's financial and financial policies: causing great fluctuations in price and
production, when inflation occurs information in society are destroyed due to price
fluctuations that make The market is disturbed.“It is difficult to distinguish between
business and poor business. At the same time, inflation causes the State to lack capital,
so the State is no longer enough to provide money for social welfare expenses industries
and fields intended to be invested and supported by the Government narrowing or
nothing. Once the state budget has a deficit of the goal of improving and improving soci
- economic life will not be able to implement.”

Actual income: The ratio of real to nominal income of a person who has sex, divided
by the rate of inflation. If inflation increases without a rise in nominal income, workers
will earn less in real terms. Therefore, we have the formula: "Real Income = Expected
Income - Inflation Rate". When people's real incomes fall, it leads to a recession, a
difficult working life and, with it, a drop in trust in the government.

National debt: If inflation rises, the country benefits from more taxes people have to
pay. However, the negative side of it is that when inflation goes up, the national debt
becomes serious because you only pay "a" if you don't spend the same amount of money
during the inflation process, but when advancing the temple, the inflation is use "a+n"
fees. So the national debt is increasing.
 11

Income distribution: When inflation increases, people who have excess and wealth
use their money to remove all goods in the market, which will lead to speculation and
this situation causes serious imbalance in the official. Supply and goods system. The
price of goods will be higher and the poor people are increasingly poorer because they
will not have enough money to buy the necessary goods for themselves.

1.4.3. Impact on economy and employment

Related to the economy has not yet reached a comprehensive level, inflation will
inevitably promote economic development, because the flow of money increases,
providing additional credit for business units. Companies that stimulate government and
mass consumption. Inflation is inversely related to unemployment: when inflation rises,
unemployment falls and vice versa.
 12

CHAPTER 2: THE SITUATION OF INFLATION IN THE WORLD AND

VIETNAM TODAY

As we have seen that Vietnam has been trying to build a socialist - oriented market
economy. Through the 6th Party Congress to the 12th Party Congress, the socialist -
oriented market economy institution has been improving and proving the correctness
when helping Vietnam escape. During economic difficulties, achieving economic
growth in the world's high years in the world.

2.1.Inflation situation in the world

2.1.1.In 2021
Along with the recovery of the economy after the great impact of pandemic,“inflation
has increased sharply in many countries around the world, recorded records for many
years. However, central bank officials,”policy makers believe that high inflation is only
temporary and steadfast in support measures until the economy is completely recovered.

Inflation increased sharply around the world.

The inflation figures show that the pressure of price increases globally is increasing.
The observers and policies have shared the same opinion, inflation is tending to increase
sharply around the world.

According to the latest data of the Eurostat, the inflation of the EU continues to
increase in May 2021, to 2.3%, compared to level 2 % in April 2021. According to
Eurostat, the price of energy has increased sharply and more expensive services have
promoted consumer price inflation in Europe. Notably, the German inflation rate - the
largest EU economy - in May 2021 increased to the highest level in a decade, due to the
increase in fuel prices and the effects only occurred once. Customs about Covid-19
pandemic. The German Federal Statistics Agency said that the consumer price in the
leading economy in Europe increased by 2.5% compared to the same period last year
and increased by 0.5% compared to April 2021, when the German economy recovered
after the Covid-19 epidemic outbreak.

In the UK, the official data shows that annual inflation is 2.5% in June 2021, higher
than the BoE set earlier, in the context of the open economy. The door returns to each
 13

stage, making the price of goods, as well as the price of engine fuel and oil prices
soaring.

In Asia, Korea's consumer inflation in June 2021 is still close to the "peak" of 9 years
and at over 2% in the third month in a row, increasing pressure on policy makers. Must
raise interest rates earlier than expected. According to the official statistics of the BOK,
the consumer price in this country increased by 2.4% in June 2021, compared to the
increase of 2.6% in May 2021, the level The fastest increase since April 2012. Korea is
said to be the first Asian nation to gradually withdraw the monetary stimulus policies
implemented during the epidemic stage and start normalizing the loosening of the
policy. The Governor of the Bank of Korea, Lee Ju-Yeol said that the bank will start
normalizing the monetary loosening policy at the end of 2021.

In China, according to the report of the General Statistics Office of China (NBS), the
manufacturer PPI in May of this country increased by 9% compared to the same period
last year, the strongest since September 2008. . Not only exceeding the increase of 6.8%
recorded in April, this increase is higher than the forecast increase of 8.5% that analysts
previously given. NBS said that PPI increased sharply in May, mainly due to the
increase in crude oil, iron ore, steel and other metals.

In Latin America, the Brazilian government said that the country's inflation rate in
May 2021 has reached 8%, the highest level from the month since 2016, continuing to
exceed the ceiling of the target of 5.25%. The central bank of this country previously
made. Countries in the region like Brazil takes many years to cope with super inflation,
while other countries like Argentina are still facing inflation at two numbers.

According to a report of the Canadian Statistical Agency, the country's inflation rate
increased to 3.6% in May 2021, the highest level in a decade. The main cause of inflation
increased sharply is due to the cost of living, food, energy and consumer goods are
higher than normal.

According to economic experts, the strong price increase in the US is thought to be

an indispensable consequence when the country's economy begins to recover from a
state of decline in 2020 due to the impact of limited measures to prevent it. Disease
blocking, leading to stagnation of business and consumption activities. US Finance
 14

Secretary Janet Yellen said that the price may continue to increase in the next few
months, but still identifying high inflation is temporary and will gradually decrease,
returning to normal threshold in the medium term.

The Fed, Jerome Powell said that inflation in the country will remain "high" in the
coming months, but will decrease when the bottlenecks of supply and other issues are
solved. Determination. During the hearing before the National Assembly, Mr. Powell
also said that the largest economy in the world was still "a long way ahead" to return to
normal state after Covid-19 pandemic. Therefore, the Fed ensures that the monetary
policy will continue to support strongly until the economy is completely recovered.

It can be said that most large central banks still believe Thinking that any increase in
inflation in 2021 will only be temporary and easily tame without having to tighten a
significant policy. However, the increase in goods on a large scale is not just a
momentary moment and there are many things that are becoming more difficult to
control. Therefore, the International Monetary Fund (IMF) has issued a warning,
inflation can be completely longer than expected, not merely a temporary phenomenon,
at the same time, urging central banks Must prepare measures to cope with the increasing
risk of inflation.

2.1.2. In 2022
Inflation worries are returning globally. In the US and the EU, the CPI has
approached 8%, the highest level of 40 years. Businesses are struggling against the
effects of rising input materials and services. Consumers also face the pressure of price
increase from home prices, energy, transportation, to essential food.

Inflation is a global phenomenon, but the level is very different between regions and
countries around the world. In countries with huge money printing (USA) and the
strongest impact from the war in Ukraine (EU, Russia), or countries that are in economic
crisis (Brazil, Argentina ...), inflation is increasing strong and record levels. But the
inflation picture is less intense in the rest of the world. In Asia, inflation is stable, even
low as in Japan (0.9%), China (0.9%), Indonesia (2.1%), or Vietnam (2.4% ).

Cost-push inflation is at a record

 15

Inflation due to push expenses is at a record level in recent decades, the process of
cooperation and development according to the trend of globalization has helped the
production and circulation of goods and services more and more effectively, contribute
to reducing costs and reducing inflation globally. But the Covid-19 epidemic and recent
geopolitical conflicts have changed everything, making the global economic machine
no longer operate as effective as before. The broken supply chain has occurred on a large
scale at all stages from production and distribution to consumption. Conclusion and
serious shortage of supply occurred in many different types of goods and services,
causing high production and distribution costs. Inflation due to push expenses has been
happening globally at the most serious level for many years. The good news is that
inflation due to the cost is often not maintained for a long time because the market
economy is always capable of adapting and balancing. It is the shortage of supply, the
rising price will make the demand shrink. On the supply side, large profit margin will
stimulate investment to expand capacity to meet the shortage and bring the supply to
balance.

For example, when the oil price increases too high, the cost of transport and energy
increases also reduces demand and stimulates the finding of replacement energy sources
with more reasonable costs. High prices also make many oil and feasible oil fields for
exploitation. Many countries have recently planned to expand the new supply of oil. The
market will soon reach the balance and overcome short -term supply shocks. Future
contracts Brent oil term 12 and 24 months are currently trading at 95 and 87 US
dollars/barrels.

Recent surveys with many other types of goods and services show that the pressure
on the price from global supply chain congestion has reached the maximum level and
begins to tend to decrease when the supply gradually resumes. The record high profit
margin of many businesses benefiting from the increase in output prices is stimulating
investment plans to expand capacity. Looking broader, most of the goods from
petroleum, iron and steel, basic materials and agricultural products ... have very high
cycles and the world always goes between two deficiency and excess states. Prices after
reaching the peak will return to the decline cycle again.
 16

From a global perspective, inflation from the cost is therefore gradually going through
the most stressful stage. With the high price background of many goods and services,
the next price increase will be increasingly limited as the supply chain gradually
recovers and the new supply appears. For each country, the ability to control the supply
of important goods and services will also determine how great inflation pressure is.

Inflation caused by bridges is making a sharing picture.

When the money supply increases sharply, the economic growth is hot, the demand
increases far beyond the supply will pull the price soaring. Dealing with this risk requires
central banks to strongly tighten monetary policy to restrain the growth momentum.

The most typical example of inflation due to the current pull in the world is the United
States. To combat the unprecedented destruction of the Pandemic, the Fed and the
government have launched large monetary stimulus packages and record fiscal. M2
money supply of US in 2020-2021 is more than 40%, the balance sheet of the Fed
increased more than doubled, to nine trillion US dollars. As a result, the US economy
recovered very quickly before the pandemic, the unemployment rate decreased to 3.6%.

The US economy is suffering at the same time, both pressure of inflation is the cost
of pushing and bridge, causing inflation to increase to a record 40 -year record. In
response to this risk, the Fed has declared war on inflation by raising the operating
interest rates and preparing for the narrowing schedule of the balance sheet from the
middle of this year. When the operator changes policies, inflation will cool down in the
US.

However, the world economic recovery is currently not homogeneous. Many Asian
countries are still in a slow growth stage such as Japan, China, Indonesia ... and witness
low and stable inflation. These are also countries that are maintaining loosening
monetary policies, contrary to the Fed. The risk of inflation due to the pulling demand
is and will be very different among countries, depending on the position of each country
in the economic growth cycle. Since then, the operating policy in each country has also
changed in accordance with its own context.
 17

(Picture 1: The correlation between population growth and inflation in the long
term)

Observing the journey of major economies, such as Japan, EU, South Korea, China,
the highest period of inflation is always associated with the strongest growth period. The
reason for this correlation is that the rapid increase in the population helps the labor
force increase, the demand for spending, credit, investment ... all grow strongly, making
the motivation for pulling the bridge is always strong. On the contrary, when countries
witnessed the growth of the population grow slowly and aging, the reversal process takes
place with the decrease in investment and consumption demand, pulling down the rising
momentum of the price.

Before the Covid-19 epidemic, which caused congested goods and prices, the world
was witnessing aging in most major economies. Inflation and interest rates decreased
for more than 30 years. Older pressure and consumer investment is still there. When the
supply instability is overcome, the world may continue the long path of growth, interest
rate reduction and inflation reduction.
 18

2.2.Inflation situation in Vietnam

2.2.1. In 2019
According to the statistics of the General Statistics Office, the CPI in December 2019
increased by 1.4% compared to the previous month and this is also considered the
highest increase of December within 9 Last year. The main reason is from the fact that
some annual rules such as consumer goods include food, catering services, drinks, public
transport services, tourism ... besides , natural prices of materials and fuel are also
adjusted to increase with world prices; health service prices increased with the increase
of basic amount; The price of construction materials and labor increases due to increased
demand and input costs.

In particular, in the second half of 2019, due to the influence of African cholera, the
supply decreased, resulting in the price of pork in December 2019 increasing by 19.7%
compared to the previous month and the impact of the common CPI increased 0,83%.

Picture 2: Inflation situation in 2019

(According to the General Statistics Office)

Although the CPI in December has a sudden increase, but the average year, the CPI
only increased by about 2.8% (the lowest increase in the past 3 years). And this shows
that Vietnam again continues to record a successful year in controlling inflation, keeping
the national economy stable.
 19

On the other hand, in 2019, because the demand for the world goods showed signs of
decline, the price of commodity groups in the world market increased slower than 2019,
even decreased. World commodity prices decreased, causing direct impact on the price
of domestic goods through import channels, with the import price of goods in the first 9
months of 2019 only increased by 0.8% compared to the same period in 2018.

The estimated results of the Ministry of Finance, the average inflation rate of Vietnam
in 2019 was 2.73% down 0.81% compared to 2018 (3.54%). This is also the lowest level
in 3 consecutive years Vietnam controlled inflation below 4%.

According to the General Statistics Office, there are two factors affecting inflation
control goals. Including:

Firstly, price management policies: The implementation of the roadmap to increase

tuition fees, adjust the electricity price, health service price.

Secondly, market factors: Food consumption demand increases on the occasion of

the Lunar New Year 2019 (in the first 2 months of the year and the last months of the
year), increasing the price of some consumer goods belonging to the food, drinks,
Catering services, tourism services, public transport services …

In addition, some other factors such as the increase in the price of essential goods in
the world (iron and steel, fuel, gas ... ) Increasing the import price index; Industrial
production price index; Production price of agricultural, forestry and fisheries increases.

2.2.2.In 2020
At the beginning of the year, many economists have expressed concern about making
comments that inflation in 2022 will be more complicated and unpredictable. Because
of the spike in pork prices and the expected continued price adjustments for some
essential goods and services during the year. The increase in pork prices has resulted in
the series of other commodities also increasing prices by 5- 10% such as chicken, beef,
fresh fish,… According to economist Vu Vinh Phu, this is a chain price increase and
that has a negative impact on the state’s price stabilization and unprofitable volatility of
the CPI in 2020 if that is fundamentally corrected.
 20

However, the upstart in the monthly CPI that started in October 2019 only lasted until
01/01/2020, mainly due to increased demand during Tet, which has been slowing down
since February 2020, and First outbreak of Covid-19 in our country. The consumer
market is almost frozen, causing the monthly CPI to decline for four consecutive months
(February-May 2020), and even hit a record low of 1.54% in April 2020, a month-on-
month decrease of 20.5%, and a decrease of 26% from the same period in 2019.
However, due to social After the quarantine period ended, the CPI rose as high as 0.66%
in June 2020, and the market began to show signs of improvement. In June 2020, the
total retail sales of consumer goods and services increased by 6.2% month-on-month
and 5.3% year-on-year.

In general in 2020, the complicated development of the Covid- 19 epidemic has

caused growth in most sectors to stagnate. The situation of global trade disruption has
brought many negative impacts on domestic production as well as import and export of
VietNam. However at the end of 2020, Viet Nam’s economy has had a bright spot with
a high economic growth rate compared to many countries in the world. Along with
macroeconomic indicators are guaranteed stability. In particular, the target of
controlling inflation has been completed when it is below the 4% level set by the
National Assembly.

On the afternoon of December 27, 2020, at the press conference of the General
Statistics Office of the Ministry of Planning and Investment on the fourth quarter and
2020 socio-economic situation held in Hanoi, Nguyen Thi Huong, director of the
General Statistics Office, said that in view of the many difficulties faced by the country,
the 2020 control Inflation would be considered a success. Towels, challenge. In an
article by Thuy Hien, according to Ms. Nguyen Thi Huong, due to rising gasoline and
natural gas prices in the country as world fuel prices rise; rice prices rising with export
rice prices and year-end consumer demand are driving 2020 In December, the CPI rose
by 0.10% month-on-month and 0.19% year-on-year in 2019. According to this, the CPI
in the fourth quarter of 2020 rose by 0.22% month-on-month, and rose by 1.38% year-
on-year in 2019.. On average, in 2020, CPI recorded an increase of 3.23% compared to
2019 and core inflation of 2020 increased by 2.31% compared to 2019.
 21

According to the economist, Dr. Vu Dinh Anh said that the second wave of Covid
that broke out in July 2020 has caused the market to cool down. Therefore, the monthly
CPI from 8/2020 to the end of the year is almost stable. That means prices remained
almost unchanged throughout 2020 except in June, mainly because gasoline prices after
a long series of declines since Tet have risen 3 times in a row and pork prices continued
to rise in the first half of June.

Picture 3: Average CPI growth rate in 2020

In general, in 2020, with the complicated epidemic situation, growth in most sectors
has stagnated. The situation of global trade disruption has brought many negative effects
on domestic production as well as Vietnam's exports. However, by the end of 2020, our
country's economy will appear to be a bright spot with a high economic growth rate
compared to many countries in the world along with macroeconomic indicators that are
guaranteed to be stable.

2.2.3. In 2021
In 2021, in the context of increasing global inflationary pressure, the prices of input
materials, freight rates continued to increase,“but the average CPI of Vietnam in 2021
only increased by 1.84% compared to the previous year, the lowest in the last 6 years,
 22

reaching the goal set by the National Assembly, continuing a successful year of inflation
control.”

Average CPI in 2021 increased due to a number of main reasons:

(i) Domestic gasoline prices increased by 31.74% over the previous year (leading to a
1.14 percentage point increase in overall CPI), gas prices increased by 25.89% (leading
to a 0% increase in overall CPI, 38 percentage points).

(ii) Rice prices increased by 5.79% compared to the previous year (resulting in an
increase in the overall CPI by 0.15 pp) due to an increase in domestic rice prices
compared to export rice prices, demand for glutinous rice and delicious rice and Tet and
the cumulative demand from people during the period of social distancing;

(iii) The prices of housing consumables increased by 7.03% compared to the previous
year, which was caused by an increase in the prices of cement, iron, steel and sand in
relation to the prices of input materials (resulting in an increase in the general CPI by
0.14 percentage points);

(iv) Prices of education services increased by 1.87% compared to the previous year
(resulting in an increase in the overall CPI by 0.1 pp) as a result of the impact of the
tuition fee increase on the new school year 2020-2021 in accordance with the action
plan Regulation Government No. 86/2015/ND-CP of October 2, 2015.

In order to achieve the above achievements, although the whole country is struggling
due to the impact of the Covid-19 epidemic, thanks to the strict guidance of the
government, all industries and levels are actively implementing simultaneous solutions
to prevent the epidemic and stabilize market prices.

On the other hand, gasoline prices and natural gas prices have fallen in line with world
fuel prices in December 2021; the Covid-19 epidemic has hindered development
across the country; some municipalities continue to reduce tuition fees for the first
semester of the 2021-2022 school year, which is the CPI decreased by 0.18% month-
on-month and increased by 1% month-on-month. The main reason is that in December
2021, compared with the previous month, it increased by 0.81% compared with
 23

December 2020. On average, the CPI will rise 1.84% year-on-year in 2021, the
slowest increase since 2016. The 12-month core inflation rose 0.81%.

Picture 4: CPI growth rate of the years 2016-2021 (%)

However, entering 2022, inflationary pressures are considered to be very large. If the
Covid-19 outbreak is under control in 2022, manufacturing and consumer demand will
increase; Inflation is affected by the problem of rising global commodity prices, such as
gasoline, coal and freight. High-priced imported goods will affect production and
product costs, push up domestic consumer prices, and create inflationary pressures.

In addition, the increase in import prices of animal feed and feed raw materials will
affect food prices. The price of housing maintenance materials included in the CPI will
also rise along with the rise in the price of construction raw materials. Affected by the
end of the tuition fee reduction period for the 2021-2022 school year and the
implementation of the roadmap for adjusting the price of educational services in
accordance with Decree No. 81/2021, the price of educational services has risen again /
ND-CP establishes a tuition collection management mechanism and tax exemption
policy for educational institutions in the national education system, Reduce tuition fees,
support learning costs, prices of educational services in the field of education and
 24

training.“In addition, when the Covid-19 epidemic is under control, the demand for
dining out, travel, entertainment and entertainment services will increase again, which
will also have a significant impact on the overall CPI.”

2.2.4.In 2022

2.2.4.1. June 2022

According to data from the General Statistics Office, inflation in June of 2022
increased by 0.69% compared to the previous month and increased by 3.18% compared
to December 2021. The cumulative average CPI in the first 6 months of the year was
2.44% compared to last year and lower than the target of 4% set by the Government.

(i) gasoline prices increased by 8.23% compared to the previous month, diesel oil
increased by 8.5% due to the impact of gasoline price adjustments according to world
fuel prices on June 1, 2022, June 13, 2022 and June 21, 2022, causing traffic group
prices to increase by 3.62%, causing the overall CPI to increase by 0.35 percentage
points.

(ii) Pork prices increased slightly by 0.87%, poultry increased by 1.1%, seafood
increased by 0.2% due to the continuous increase in feed prices and freight rates, causing
the food group to increase by 0.98%, causing the overall CPI to increase by 0.21
percentage points.

Picture 5: Movement in pork prices, gasoline prices and CPI period 2018 –
2022 (%MoM)
 25

2.2.4.2.Novermber 2022
According to data from the General Bureau of Statistics, domestic gasoline prices
are adjusted in line with world market prices, and people's strong demand leads to rising
rents, which are the main reasons for the 0.39% month-on-month increase in the CPI in
November 2022. Compared to December 2021, this month's CPI increased by 4.56%
and compared to the same period last year increased by 4.37%.

In the 0.39% increase of CPI in 11/2022 compared to the previous month, there were
8 groups of goods and services with an increase in price index and 3 groups of goods
with a decrease in price index.

On average, in the first 11 months of 2022,“Vietnam's CPI increased by 3.02%

over the same period last year; core inflation increased by 2.38%.”

In particular, the traffic group increased the highest with 2.23% (making the general
CPI increase by 0.22 percentage points) due to the impact of domestic gasoline price
adjustments on November 1, November 11, 2022 and November 21, 2022, causing
gasoline prices to increase by 5.83% (gasoline increased by 5.84%; diesel oil increased
by 5.25%).

In addition,

(i) the price index of vehicles increased by 0.15%; spare parts increased by 0.16%;
other services with personal transport increased by 0.15%; public transport services
increased by 0.14%.

(ii) Housing and building materials rose by 0.97% (driving the overall CPI to rise by
0.18 percentage points). Due to strong rental demand, house rents rose by 1.54%; house
maintenance prices rose by 0.45% due to painting, wall coverings, paving, unskilled
labor, and year-end house maintenance and construction demand increased; home repair
materials prices rose 0.28%, as prices for cement, masonry, concrete tiles, roof and wall
coatings rose in tandem with production input materials.

(iii) gas prices increased by 5% because from 1/11/2022, domestic gas prices
adjusted to increase by 20,000 VND/12 kg bottle after world gas prices increased by 35
USD/ton (from 575 USD/ton to 610 USD/ton); kerosene prices increased by 7.02% due
to the impact of price corrections on 01/11/2022, 11/11/2022 and 21/11/2022.
 26

(iv) In the opposite direction, water prices and domestic electricity prices decreased
by 0.09% and 1.79% respectively due to cool weather, so the demand for electricity and
water decreased.

Vietnam's core inflation in November 2022 increased by 0.43% month-on-month

and 4.81% year-on-year.

On average, core inflation rose 2.38% in the first 11 months of 2022 compared to the
same period in 2021, below the broad average CPI (up 3.02%), reflecting consumer
price volatility driven mainly by food and fuel prices expired.

2.2.4.3.December 2022
Picture 6: Gasoline price movement 11 months in 2022

In 2022, Vietnam faced a total inflationary pressure when energy price increased, and
at the same time faced the lack of energy. Besides, the cost of input materials also
increases on a large scale.

By the fourth quarter, petrol prices decreased significantly, resonating with policies
to raise interest rates, keeping the "exchange rate line" partly helped pulling back the
CPI, stabilizing the psychological expectation of inflation. However, the pressure of
inflation in the following year is not small, when looking at the number of inflation
targets has been raised from 4% to 4.5%. Accompanying, a series of organizations
forecasted inflation in the following year.
 27

In the recent Vietnamese economic report, HSBC reduced inflation forecasts in 2022
(from 3.4% to 3.2%), but raised inflation forecasts in 2023 from 3.7. % to 4%.

Similarly, the results of the survey expected inflation of credit institutions and foreign
bank branches in Vietnam published in mid - December, showing that the 2023 inflation
level expected to be 3.96%, increasing worthy of Compared to the survey in October is
3.47%.

In addition to the highlights of domestic price control, Vietnam will still face external
factors affecting inflation.

(i)the price of energy is still unpredictable, especially depending on the world

geopolitical situation, the Russian and Ukrainian war, the opening and control of CIVI-
19 epidemic in China, the supply of oil supply From OPEC and move of large countries.

(ii) the exchange rate. This also depends on the foreign cash flow flowing into
Vietnam, the commercial story and the rate of raising the US dollar interest rate. A bright
spot is that the Fed will reduce interest rates, contributing to reducing the exchange rate
pressure of other countries, including Vietnam.

(iii) A great influence on Vietnamese inflation is the story of opening the Chinese
market.

2.2.5.Inflation forecast 2023

According to the economists with the topics "Price Market Changes in Vietnam 2022"
and "Vietnam Economic Research Institute 2023" 4 -1 Forecast, Vietnam's average
inflation rate in 2023 will be around 3.5%.

Speaking at the seminar, Assoc. Prof. Dr. Nguyen Vu Viet, Deputy Director of the
Academy of Finance, said that the world economy in 2022 took place with many
unexpected events. The military conflict between Russia and Ukraine made the price of
basic goods on the world market increased sharply in the first 6 months of the year.
Especially the price of crude oil, natural gas prices and natural liquefied gas, fertilizer
prices have increased the most since 2011, causing risk of energy security crisis, food,
creating great pressure on abuse. Global broadcast. In many Western countries, inflation
has increased to/less than 10%, the highest in the last 30-40 years.
 28

Commenting on the situation of domestic inflation, Dr. Nguyen Duc Do, Deputy
Director of the Institute of Financial Economic Economics said that the monetary policy
is cautious in 2022 along with the world economic risk falling into a recession in 2023.
Will cause inflation pressure this year not too large.

"Inflation compared to the same period last year was likely to peak in January 2023
and then return to the average of the period 2016 - 2022, about 3%. The average inflation
in 2023 is forecast to be forecast to be will be willing to At about 3.5%" according to
Dr. Nguyen Duc Do. Dr. Nguyen Duc Do said that it can be said that inflation pressure
in Vietnam in 2023 will not be too large. Because, the pressures for inflation from
variables such as currency, exchange rates, natural materials are likely to have peaked
in 2022 and will decrease in 2023.

Share the view, Assoc.“Tri Long also emphasized that the consumer price index in
2022 increased by 3.15% compared to 2021 was the brightest point of Vietnam's
economy in 2022;”Controlling relatively low inflation rate in the context of the world
struggling to deal with non -coding inflation and "price storms".

Emphasizing Vietnam belongs to groups of countries with low inflation, while world
inflation continues to increase, but Assoc. ) The CPI is found not much fluctuating and
tends to go sideways.

Meanwhile, fuel prices, especially petrol prices, is forecast to cool down in 2023;
China opened the economy after implementing Zero Covid. Meanwhile, agricultural
production in our country is still developing quite well, GDP in 2022 increased by 8.02%
- is the highest increase in more than 10 years...

"Therefore, the average CPI in 2023 compared to 2023 compared to With 2022, it is
likely to maintain at 3.2 - 3.5%, under the target of the National Assembly, it is
completely feasible "
 29

CHAPTER 3: POLICY SOLUTIONS TO CURB INFLATION

To help curb rising inflation in 2022, some proposed solutions are as follows:

3.1.Government solutions in the short and long term

3.1.1.Situational measures
These are measures adopted with the immediate goal of "inflation fever". From there,
long-term monetary stability measures will be applied. They are usually applied when
the economy is in a state of hyperinflation.

First, situational measures are often used by governments, primarily to reduce the
amount of paper money in the economy, such as suspending the issuance of money in
circulation. This measure is also known as a monetary freeze policy. The rate of inflation
immediately rises, the central bank must stop actions that may lead to an increase in the
supply of currency, such as suspending the execution of depreciation and rediscounting
operations for credit institutions, suspending the purchase of short-term securities in the
money market, not issuing money to compensate for budget overruns.“The state uses
measures to reduce the amount of money supplied to the economy, such as: the central
bank sells short-term securities in the money market, sells foreign currency and borrows,
issues government debt instruments to borrow money into the economy to compensate
for government budget overruns, increases interest rates on deposits, in particular an
increase in interest rates on housing savings deposits.”

Second, implement tight fiscal policies such as postponing unnecessary expenditures

in the economy, re-balancing the budget and cutting spending to the extent possible.

Third, increase the consumer goods fund to balance the amount of money in
circulation by encouraging free trade, easing tariffs and other necessary measures to
attract goods from outside.

Fourth, borrowing and applying for aid from abroad.

3.1.2.Strategic measures
These are measures that have a lasting impact on the development of the national
economy, including:
 30

First, promote the development of commodity production and expand the flow of
commodities. This is the most important strategic measure in the economy to limit
inflation and maintain monetary stability. The stronger domestic production develops,
the stronger the preconditions for monetary stability become. Focus on earning foreign
exchange through export and developing tourism…

Second, rectify administrative institutions and reduce administrative personnel. A

good implementation of this measure will go a long way toward reducing recurrent
household expenditures and thereby reducing state budget overruns.

Third, strengthen the management and administration of the state budget on the basis
of increasing revenues for the budget in a reasonable way, preventing revenue loss,
especially tax losses, and improving the efficiency of state budget expenditures.

In addition to policies to reduce inflation and tighten inflation, the government needs
to implement synchronous policies such as:

(i) First, budget overruns must be kept below 5% of GDP. Because budget overruns
are a major contributor to supply-demand imbalances.

(ii) It is necessary to increase commodity production on the basis of promoting the

development of public production and agricultural production, that is, to create more
food. Some commodities are means of production, and some commodities are fuel and
energy. On the other hand, economic restructuring and technological improvement need
to continue to ensure a gradual reduction in production costs.

(iii) Regarding the banking sector, which is responsible for being the one that plays
the most important role in controlling inflation, the following steps should be taken:

+ Improve the efficiency of credit activities on the basis of actively mobilizing capital
and effectively lending projects.

+ Strictly control the currency supply of the State Bank for foreign currency
objectives, stabilize the foreign currency market and the Vietnamese dong exchange
rate.

+ Improved efficiency in using mandatory reserve tools.

 31

+ Enhancing the effectiveness of commercial bank inspections.

(iv) Foreign debt management organizations plan and effectively use capital sources
into Vietnam in various forms such as loans from IMF, WB, ADB,..

In short, the State needs to have close coordination between ministries and levels in
effectively implementing microeconomics and macro policies (solving the problem of
budget deficits, adjusting import and export activities, managing prices and goods
circulation well...) to be able to ensure the best economic development. and effectively
control abuse.

3.2.Monetary policy solutions

Monetary policy is the overall implementation of measures, using the tools of the
Central Bank to contribute to the achievement of macroeconomic policy objectives
through the dominance of money flows and money volumes such as discount rates, re-
discount rates, compulsory reserves...

In the period from 2017 to now, the State Bank said that on the basis of the
government and national assembly objectives and the central tasks of the sector, the
State Bank operates a proactive and flexible monetary policy in close coordination with
fiscal policy and other macroeconomic policies to stabilize macro and control inflation.

First, pay close attention to the macro situation and domestic and foreign foreign
exchange market dynamics, and implement corresponding management measures
proactively and in a timely manner. Simultaneously and flexibly use monetary policy
tools to stabilize the money market, promote the structural adjustment of the stock and
capital markets, stabilize the foreign exchange market, and control the growth of total
cash and credit in accordance with the established direction.

Second, regulate and control the interest rate in accordance with the macroeconomic
situation, inflation situation and money market trends, and stabilize the interest rate
level. Continue to guide lending institutions to save costs, improve operating efficiency,
stabilize deposit interest rates, create conditions for lowering loan interest rates, and
share difficulties with borrowers, but ensure financial security in operations.
 32

Third, continue to operate flexible central exchange rates, synchronously coordinate

monetary policy solutions and tools to support exchange rate stability, carefully consider
selling foreign currency market interventions in case of imbalanced foreign currency
supply and demand to ensure that the exchange rate does not fluctuate excessively,
causing psychological instability in the market, limiting speculative factors, holding
foreign currencies, affecting the goal of stabilizing currency value and macroeconomics.

Fourth, continue to guide credit institutions to effectively concentrate credit funds in

key areas and production and operation areas guided by the government. Continue to
guide the implementation of specific government loan projects, such as rice, coffee,
fisheries, etc. At the same time, the National Bank instructed credit institutions to
continue to take measures to solve difficulties and provide business and people Develop
production and management, especially pig breeding, feed production and veterinary
drug production.

Fifth, continue to work closely with fiscal policies and other macroeconomic policies
to achieve the goals of controlling inflation, stabilizing the macroeconomy, and
supporting reasonable growth.

3.3.Fiscal tightening policy.

Fiscal policy is the spending policy of the government or also the budget policy such
as taxes, issuing bonds, treasury bills. To reduce the amount of money in circulation, the
Ministry of Finance needs to offer some solutions:

(i) Reducing budget spending means reducing recurrent spending and cutting public
investment.

(ii) Increase consumption taxes to reduce spending in society.

(iii) Strive to increase budget revenues by about 7-8% compared to the estimates that
have been approved by cutting the budget deficit to 5% of GDP.

(iv) Closely monitor and review government, national and non-government-

guaranteed debt.
 33

3.4.Balance supply and demand in the economy.

The Prime Minister asked officials at all levels to balance the supply and demand of
essential commodities to serve the needs of consumers such as gasoline, rice, iron and
steel,.... Associated with the strict price control, the Prime Minister directed that it is
necessary to enlist production and business for economic growth, striving with the
highest spirit to solve capital for enterprises, especially working capital.

Market price stability: The Prime Minister called on businesses responsible for the
country not to redeem profits and raise prices of goods. The government has identified
this priority to curb inflation, stabilize the macroeconomic situation, and create social
security. especially essential commodities such as gasoline, cement, fertilizer…

Pushing the export network to reduce trade deficit: It is recommended to promote

items with competitive advantages such as seafood, textiles, leather shoes,…
 34

CONCLUSION

Inflation is one of the four most important factors in any country (high growth, low
inflation, low unemployment, balance of payments). Inflation and economic growth are
two closely related and complex issues. Inflation can be an economic engine, which in
turn can inhibit economic development. Therefore, we must pay attention to the balance
and harmonious relationship between these two issues, because this is the only way to
ensure sustainable development of Vietnam in the current period of innovation.

A healthy economy is one with moderate inflation, the rate of growth of inflation is
less than the rate of economic growth.“Therefore, in order to control inflation, stabilize
macroeconomics, achieve economic growth and social security goals, and well
implement the goal of industrialization and modernization of our country in the coming
time, the Party and State need to perfect policies, institutions and skills to cope with
inflation due to external influences, Build a healthy economy from within. Stabilize
prices to balance the market, pay special attention to strict management with industries
accounting for a high proportion of GDP of the country to combat the phenomenon of
speculative price blowing, especially the real estate market has land fever waves that
make the land and housing market continuously increase for a long time, making it
difficult for people with low incomes to having houses to live in, when the real estate
market has a stronger supply than demand, it will form a real estate bubble, which is
very likely to lead to inflation and some key private corporations holding projects will
default, affecting related industries and unemployment will increase, inflation is
happening again. Or for the stock market there are cases of market manipulation that
inflates stock prices causing manipulation of financial markets. Inflation isn't all bad,
but it has certain advantages. Therefore, we must control inflation to keep it at an
acceptable level or a balanced level and intend to create conditions for it to become a
driving force for the country's development. In short, with the current development of
market economy, the government needs to work closely with various ministries to
thoroughly stabilize the status of Vietnam's economy in the international development
and integration stage. The ultimate goal of implementing the right monetary and fiscal
policies to make advanced economies work without inflation is to reduce the amount of
money in circulation.
 35

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