[NEWS] – How will inflation in 2023?

Inflation over the same period in Vietnam is expected to peak in January 2023 and gradually decrease in the following months’ thanks to the prudent monetary policy of the State Bank of Vietnam (SBV) in 2022 and several other economies. The economy shows signs of recession, causing the price of raw materials - fuel - materials to tend to decrease.

Not subjective to inflation pressure

Many major economies in the world face record-high inflation in 2022. Still, Vietnam belongs to the group of economies with low inflation compared to the standard level with the consumer price index. consumption (CPI) for 2022 increased by 3.15% compared to 2021, lower than the target of about 4% set by the National Assembly.

Ms. Nguyen Thu Oanh, Director of the Price Statistics Department under the General Statistics Office, said that the target of controlling inflation below 4.5% in 2023 is a challenge for economic management and administration agencies because several factors will put pressure on inflation.

According to the General Statistics Office, the price index of raw materials for production in 2022 increased by 6.79% compared to 2021, the highest increase in the past 10 years. The commodity import price index increased by 8.56%, the highest increase since 2012 while more than 90% of Vietnam’s import turnover value is imports of production materials.

In addition, the implementation of price adjustments for state-managed goods such as education, health care, and electricity also strongly impacts the consumer price index (CPI). Specifically, the adjustment of prices for education and health services, which are the two groups that account for nearly 12% of the CPI basket of goods, will impact CPI in 2023.

Similarly, the adjustment of EVN’s domestic electricity price during the year also put pressure on the inflation index. Accordingly, when the electricity price index increases by 10%, the CPI will increase by 0.33 percentage points.

Accordingly, inflationary pressure comes from both supply factors (cost-push) and demand factors (demand-pull). On the supply side, the second round impact from the high world commodity prices in the period 2020-2022 will continue to be reflected in production costs (import inflation), thereby affecting the consumption costs of other commodities—domestic goods.

On the demand side, it is expected that the domestic economy will continue to recover, thereby promoting the recovery and rapidly increasing aggregate demand of the economy, putting pressure on prices.

Forecast the path of inflation, and prices in 2023

Regarding inflation in 2023, Dr. Nguyen Duc Do, Deputy Director of the Institute of Economics and Finance, forecasts that inflation over the same period in Vietnam will tend to decrease gradually after peaking in January 2023, then gradually decrease to 3% by the end of 2023 thanks to the prudent monetary policy of the State Bank in 2022, as well as the risk of the world economy falling into recession.

According to data released by the General Statistics Office, the total means of payment up to December 21, 2022, increased by 3.85% compared to the end of 2021, while by June 20, 2022, it increased by 3.3. %. This means that the money supply is unlikely to increase in the second half of 2022.

In addition, the interest rate in 2022 has increased by about 2-2.5 percentage points compared to 2021.

With the local currency, the Vietnamese dong only depreciated by about 3.7% against the US dollar in the period from the end of 2021 to the end of 2022. This is a not-too-large devaluation, so it will not affect inflation too strongly. broadcast next time.
On the banking side, the SBV will continue to actively, flexibly, and synchronously administer monetary policy tools to control inflation, contribute to macro stability, and support economic recovery. In addition, managing interest rates in line with the macroeconomic situation, inflation developments, and monetary policy objectives, supporting the recovery of production and business activities; flexible exchange rate management, synchronous coordination with monetary policy measures and tools to stabilize the foreign currency market.

In the context of the world economy, it is forecast that the price of gasoline and other raw materials in 2023 will hardly increase sharply, despite China’s reopening of the economy and the increased risks related to the Russia-Ukraine war. The average oil price in 2022 is at its peak. Inflation showed signs of cooling down in December 2022, with core inflation only increasing by 0.33% compared to the previous month.

For gasoline and oil, the National Assembly Standing Committee also passed a draft resolution agreeing to reduce 50% of the environmental protection potential for gasoline (except ethanol), diesel oil, fuel oil, lubricants, grease, etc. the tax bracket ceiling from January 1, 2023 to December 31, 2023 to support production and business of businesses and people’s lives. Keeping gasoline and oil prices stable is also "supported" when fuel prices, especially world gasoline in 2023, are expected to decrease compared to 2022 due to the decrease in consumption demand in 2023. The context of the US and EU economic growth slowed down and tended to decline, according to analysis from the World Bank (WB). Even some major economic organizations in the world forecast crude oil prices to fluctuate in the range of 80-90 US dollars per barrel.

On the part of the management agency, Mr. Nguyen Minh Tien, Director of the Price Management Department under the Ministry of Finance, said that the monetary policy will be cautious, ensuring initiative and efficiency, and coordinating with the administrative authorities. Expansionary fiscal policy is reasonable, focused, and focused, contributing to stabilizing the macro-economy, controlling inflation according to the target, and ensuring a great balance of the economy.

With state-priced goods and public services that are implementing the market roadmap such as medical examination and treatment services, educational services, and electricity, ministries, branches, and localities need to be proactive in calculating, and preparing price plans to deploy adjustments at a time by regulations and general context.

Source: Collector