national economy under growth and inflationary pressure picture 1

Worries as inflation nears 4% threshold

The average Consumer Price Index (CPI) recorded during the opening five months of the year increased to 4.03%, meaning that it has exceeded the threshold of 4% - the lower limit of the inflation control target of between 4% and 4.5% this year. This figure represents a concern for the national economy.

Statistics show that although the CPI in May only edged up by 0.05% month on month, it rose by 4.44% compared to the same period last year, and it shows no signs of waning.

According to the Ministry of Planning and Investment, the inflation rate is likely to continue going up due to fluctuations occurring in the global supply sources and prices, demand for the use of electricity, and passenger transportation in the country during the peak summer season.

Furthermore, the government is anticipated to adjust prices of electricity, education and health services, alongside an impact from a salary reform policy.

In fact, inflationary pressure is a hot topic discussed by National Assembly deputies at the ongoing seventh session of the legislature.

The deputies agreed that there remains an inflammatory risk due to many factors, such as global uncertainties in commodity prices, geopolitical conflicts, and the minimum wage rising from July 1.

Moreover, rising gasoline prices in the world market have also fuelled domestic petrol prices, transportation costs, air tickets, and house rental prices.

This comes amid strong fluctuations in the US$ exchange rate and gold prices, thereby creating the psychology of increasing commodity prices, according to NA deputies.  

Business and production activities face challenges

Experts pointed out that the Government is required to take cautious measures in a bid to contain inflation and manage market prices amid the current context. They noted that not only does trying to fulfil the CPI target matter, but also business and production activities do.

They emphasised the need to proactively devise solutions for price management in a proper and timely manner in order to minimise the impact on the competitiveness of businesses, the economy, people's lives, as well as the country’s economic growth in the short, medium, and long terms.

In fact, the producer price index (PPI) has always been a concern for firms over recent years. Amid the weak market demand and difficulties occurring in cash flow, high input prices will affect the efficiency of enterprises’ operations.

Businesses are also facing hurdles in terms of exchange rates. According to te General Statistics Office, the US dollar index increased by 1.15% in May compared to the previous month, up 4.21% compared to December 2023, and 7.85% against the same period last year.

Economists predicted that the exchange rate would continue to be adjusted due to external pressure, in turn leading to rising costs of importing goods, raw materials, fuel, and lending rates of businesses, as well as affecting domestic inflation. As a matter of course, people and firms will have to bear these consequences.

Insiders underlined the importance of solutions for not only controling market prices, but also dealing with issues relating to exchange rates, interest rates, the gold market, and the real estate market. If these hurdles are not removed, they would cause macroeconomic instability in the long term, they noted.

 According to the Ministry of Planning and Investment, priority should be given to accelerating growth along with maintaining macroeconomic stability and controlling inflation.