Vietnam braces for a protracted battle against rising inflationary pressures as global economic headwinds intensify. Deputy Prime Minister Le Minh Khai has recently sounded the alarm at a high-level meeting, urging ministries, agencies, and local authorities to closely track fluctuations in global commodity prices.
This proactive approach is designed to devise appropriate, flexible, and timely response scenarios to contain inflation within the National Assembly’s targeted range of 4-4.5% by 2024.
The convergence of military conflicts, great-power rivalry, and disrupted supply chains has increased risks to energy and food security, fueling price volatility and posing significant challenges to Vietnam’s price management efforts.
“Ministries and branches must focus on monitoring economic trends at home and abroad, make specific and detailed forecasts of factors affecting the general price level, and proactively develop detailed response scenarios for each industry and field,” DPM Khai said.
Bracing for Prolonged Turbulence
The first quarter of 2024 witnessed increasing inflationary pressures, with the average Consumer Price Index (CPI) rising 3.77% compared to the same period in 2023, spurred by post-Lunar New Year demand surges.
Looking forward, the Deputy Prime Minister cautioned that price management would face immense pressure in the coming months as escalating conflicts, unabated inflation, and the lingering impact of the pandemic exacerbate volatility in energy, raw materials, and maritime transport costs.
A Multifaceted Counteroffensive
To address these challenges proactively, Le Minh Khai outlined a comprehensive strategy involving coordinated efforts across government agencies.
Careful assessment of the optimal timing for price adjustments of essential goods and services is essential, ensuring alignment with the new wage policy effective July 1st.
Simultaneously, ensuring adequate supplies of essential products, especially those carrying high weights in the Consumer Price Index (CPI) basket, is imperative to meet consumer demand.
The strategy also highlights continuing the roadmap for adjusting public service prices based on market principles. Proactively preparing price adjustment options will enable swift responses while maintaining control over inflation.
Furthermore, strengthening policy research on taxes, fees, credit, interest rates, and exchange rates is crucial to supporting businesses, citizens, and aiding inflation control efforts.
Moreover, reinforcing the legal framework is a key component of the strategy. Implementing the Price Law from July 1st will establish a robust framework for effective price administration, providing a solid foundation for the government’s multifaceted approach to combating inflationary pressures.
The Deputy Prime Minister instructed the State Bank to diligently implement directives on gold product management, ensuring balanced supply and demand at reasonable prices. Research into long-term solutions aims to align gold management with state oversight and citizens’ legitimate needs.
Transparent Communication and Stakeholder Engagement
Emphasizing transparency, Mr. Le Minh Khai tasked ministries and agencies with the timely public dissemination of price information, particularly for essential products and services impacting production and livelihoods.
“Every action must be for the common good and the people’s benefit,” he stressed, “resolutely fighting against price inflation, against group interests, limiting the growth of inflationary expectations, and stabilizing consumer and business confidence.”
Vietnam’s inflation battle mirrors challenges faced globally as the pandemic’s aftershocks, supply disruptions, and geopolitical tensions roil markets.
The International Monetary Fund (IMF) has cautioned of a “difficult year” ahead, with global inflation projected at 5.9% in 2024, moderating to 4.5% by 2025. Developing economies bear the brunt of rising food and energy costs, exacerbating poverty and economic instability.
A Resilient Economy Amid Headwinds
Despite significant challenges, Vietnam’s economy has shown resilience, with the retail market projected to continue recovering. In Q1 2024, total retail sales of goods and consumer services reached over VND 1,537 trillion (USD 60.8 billion), an 8.2% increase year-on-year, with travel revenue surging 46.3%.
However, uncertainties remain. The Ministry of Finance has outlined three scenarios, forecasting average CPI increases of 3.64%, 4.05%, or up to 4.5% compared to 2023, depending on the severity of global and domestic economic conditions.
A Balancing Act for Sustainable Growth
As Vietnam navigates uncharted waters, the government’s ability to strike a balance between controlling inflation, supporting businesses and citizens, and fostering economic growth will be crucial.
The proactive and coordinated approach advocated by Deputy Prime Minister Le Minh Khai highlights the importance of timely and effective measures across all levels of government and local authorities.
By closely tracking price fluctuations, developing sector-specific response scenarios, and utilizing fiscal, monetary, and regulatory tools, Vietnam aims to ride out the global economic storm while protecting the well-being of its citizens and the sustainability of its economic progress.
As the world grapples with geopolitical tensions and the ripple effects of supply chain disruptions, Vietnam’s resilience and agility in addressing these challenges will be tested.
Nevertheless, the government’s firm commitment to transparent communication, stakeholder engagement, and a multifaceted strategy for price management provides a beacon of hope during these turbulent times.
