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Global inflation may cool down within a year, not a big worry for Vietnam

Despite rising commodity prices following the Russia-Ukraine crisis, experts believe that within six months or a year from now, global inflation will cool down.

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Ukraine tension and the Fed’s interest rate hike are the two most concerning factors for the market today. Many economic sanctions imposed on Russia have disrupted supply chains and led to higher commodity prices and risk of inflation.

Dinh Quang Hinh, an expert at VNDIRECT securities company, said the impact on the world economy depends on how long the Russia-Ukraine tensions will last. Even if the conflict occurs in a short time, the impact on both sides will be significant because the sanctions imposed by the West on Russia are unlikely to be withdrawn soon. Global commodity prices will therefore be affected.

Russia is one of the world's largest exporters of oil and gas (accounting for 30% of total gas consumption by Europe), fertilizer, steel and wheat. The price for this group of commodities will be greatly affected if the crisis continues.

Rising commodity prices will put pressure on inflation, especially in economies with high inflation such as the US and Europe, forcing the central banks of these countries to change monetary policy, said Mr. Hinh.

Mr. Cao Minh Hoang, Investment Director of the IPA Fund Management Company, said that in the immediate future, global inflation will increase rapidly because short-term aggregate supply will be affected by supply chain disruptions due to Covid 19 and the Russia-Ukraine crisis. However, global production capacity is being replenished very quickly, and global inflation will return to normal (about 2%) as supply is met, he said.

Mr. Hinh said that inflation in the world is diverging. The EU and the US are facing great inflationary pressure, but Asian countries like Vietnam and China are controlling inflation quite well. However, to control inflation, big economies like the US and EU need a longer time, not just 6 months or one year.

According to experts, the Russia-Ukraine crisis will end before this summer, before Europe warms up. At that time, the prices of many commodities, which have rocketed, will slow down. However, for some commodities such as iron, steel and fertilizer, the prices are unlikely to fall as deeply as they did in the fourth quarter of 2021.

Though it cannot avoid the influence of the world economic and political situation, experts believe that Vietnam's inflation in 2022 is still under control, only about 3.5%. The reason is that food and foodstuff prices have remained stable, and costs of education, health care, and space rental have not increased or even decreased over the past time. As for petrol prices, in the coming time, the Government may have more intervention measures (for example tax reduction) if needed.

If inflation can be controlled in 2022, Vietnam still has an opportunity to expand policy easing, and support economic recovery and growth.

Le Ha

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