In its report about the economic and financial situation of Vietnam and the rest of the world in July and the first seven months of the year, the Ministry of Finance (MOF) showed concern about inflation.

The CPI in July 2022 increased by 0.4 percent compared to the month before, by 3.14 percent compared to the same period last year and 3.59 percent compared to December 2021, the highest level since 2018.

As such, in the first seven months of the year, the CPI rose by 2.54 percent compared to the same period last year.

Many measures to stabilize prices have been implemented by the government. In July 2022, the petroleum prices began cooling down after three times of price adjustments.

Despite optimistic forecasts that Vietnam’s inflation rate will be 3.7-4.2 percent this year, MOF still emphasized the risk of high inflation.

The ministry pointed out that Vietnam is under pressure because the economy has high openness and inflation rates in other countries are high (because of the Russia-Ukraine conflict, Covid-19 pandemic, food and energy price increases). 

“Inflation is one of the highest risks for Vietnam and the world in 2022,” MOF said.

According to the ministry, inflation could be high in 2022, which puts pressure on macroeconomic management and may overshadow the efforts to support people and businesses, and social and economic recovery programs. 

High inflation, if it occurs, will cause daily expenses to increase, affecting especially poor and low income earners.

Regarding the interbank interest rate performance, MOF said interest rates began increasing in mid-June 2022 and rose sharply in the second half of July, which was attributed to the State Bank of Vietnam’s move of withdrawing money from circulation.

The interbank overnight interest rate on July 27 increased to 5.13 percent per annum from 5.01 percent and 3.67 percent in the previous two sessions.

The overnight interest rate has become 10 times higher than the 0.3-0.4 percent in mid-June, while the one-week and two-week interest rates have increased by 2-4 times.

In the first seven months of the year, banks raised the interest rates to 7-7.55 percent per annum for long-term deposits. 

Many countries have raised interest rates to curb inflation. If Vietnam does the same, this will be contrary to the government’s economic recovery program, and if it doesn’t do it, the value of currencies will decrease.

Luong Bang