As Việt Nam’s growth momentum faces headwinds, with global recovery slowed by the impacts of the pandemic, inflation pressure and a surge in oil prices, National Assembly Deputy Trần Hoàng Ngân talks to Tuổi Trẻ (Youth) newspaper about the need to have appropriate measures to put inflation under control before it’s too late.
You have previously proposed using environmental protection and special consumption taxes to control the increase in gasoline prices, why do you persist with this view?
Experiences from economic development in Việt Nam and around the world show that high inflation is very dangerous. Therefore, it is necessary to closely monitor the situation and come up with timely solutions. When high inflation occurs, to control it, banks often raise interest rates, which will turn everything upside down and is a very dangerous move for the economy.
Therefore, it is necessary to persist in preventing the problem as soon as symptoms of high inflation show. One of the solutions that can reduce price increases is to control the price of gasoline.
As CPI in Việt Nam is at 2.2 per cent, it is not as bad as in many other countries. Is it too early to worry?
Việt Nam's economy is very open to the world. When the world price increases, we have to pay high prices right away. They call this imported inflation. Currently, the global situation is complicated with high inflation. Many countries pumped money to stimulate the economy after COVID-19, due to supply chain disruptions and the Ukraine-Russia conflict.
All these reasons pushed commodity prices into dangerous territory, not only in petrol and gas, but now spreading to wheat, rice and fertiliser.
At this time, CPI in Việt Nam is only 2.2 per cent, which is relatively low compared to other countries. In the US, the inflation rate in March was 8.5 per cent, the highest in 40 years. The figure was 7.4 per cent in Europe and 9 per cent in the UK, the highest in 30 years. In Việt Nam, people are having to buy gasoline at high prices, more than VNĐ30,000/litre. It directly impacts the price of goods and services, which will be reflected in the CPI in the coming months.
If gasoline prices are not well controlled, there will be price increases in many commodities and that spiral will lead to an increase in interest rates. At that time, not only people and businesses but also the State would face difficulties.
Assuming high inflation does occur, interest rates must increase, what will happen?
Currently, the vast majority of people are tired and financially exhausted after two years of COVID-19. Therefore, rising prices on essential goods will make life more difficult. For businesses, costs will increase if they have to spend more to pay interest. When input cost increases and profits decrease, they can’t expand production to create jobs.
As for public investment projects, as prices increase, they must either be stopped for financial adjustment or stay unfinished.
In general, after a series of increasing interest rates to cope with inflation, the economy declines or grows below its potential. That's why high inflation is scary.
Do you think the Government is hesitating with reducing tax because that would affect budget revenue?
It is necessary to consider the difference between prevention and treatment. When there are signs of inflation, it can be treated with preventive measures like reducing taxes, and not increasing the prices of public services. Once high inflation really occurs, tougher measures must be conducted, such as increasing interest rates as I mentioned above.
People might ask how we can control inflation when high inflation is occurring all over the world. But we do not expect that the measures can promise price stability but rather minimise its impact on people, businesses and the economy. This avoids high inflation, through many tools like taxes, administration, production organisation and balancing supply and demand.
We still have tax space to reduce the increase in gasoline prices, which is 50 per cent of the environmental protection tax and special consumption tax. We should not be afraid to reduce immediate revenue by reducing taxes to control prices. Because if high inflation occurs, budget revenue will also decrease more severely.
At that time, not only businesses but also people would not have much income to pay personal income tax. We have to make sacrifices in the short term for the long term from the lessons of prioritising inflation control, stabilising the macro-economy, and ensuring social security in 2011. In the 2008-2010 period, due to the impact of the world financial crisis, the inflation rate in 2008 was 22.97 per cent, in 2011 it was 18.58 per cent, and interest rates sometimes exceeded 20 per cent, causing many businesses to go bankrupt and the economy to face difficulties. VNS
Trần Văn Lâm, permanent member of the National Assembly Finance and Budget Committee
Imported inflation is understood as inflation factors that are not internal to the country's economy but due to fluctuations and instability from the world market, causing inflation to grow out of control.
In the context of Việt Nam's extensive integration, the impact of the world market on the domestic market and prices is inevitable. We need to have certain policies to minimise the impacts.
For example, if we determine that gasoline prices will continue to increase in the future, there needs to be a roadmap to stabilise prices. Prices still increase step by step according to the increase in world prices, but the increase is slower.
We should not let petrol prices create shocks to the economy; we should limit and try to support the economy and domestic production sectors to be less affected, so the prices of domestically produced goods do not spike.
The solutions are diverse. We can forecast steps such as stretching the price increase; finding alternative sources of supply with reasonable prices, and finding sources of domestically produced goods because, in case of high volatility, domestic production has an advantage. We can also increase autonomy and initiative in the economy, in any field that is likely to fluctuate, there is a solution to find alternative sources of supply accordingly.
Lê Thanh Vân, permanent member of NA Finance and Budget Committee
In order to control inflation, there are two tools: fiscal and monetary policies. We must deal with it in a harmonious way, so that the economic sectors can recover safely.
Besides, it is necessary to balance domestic resources to avoid the two trends of either closing the money source too much or pumping money into society. Like a sick person who has to eat and drink to recover. If you eat too little, you will be exhausted, and if you eat too much, it will lead to overeating.
That said, we see that the fiscal and monetary policies need to be rhythmic, there must be easing but there must be harmonious control. We can loosen in fields where the recovery is most likely to take place.
In accessing loans, if we strictly tighten capital for real estate credit, the market will be negatively affected. It must be clearly identified: whoever performs well should continue with the loan limit, and whoever speculates, or borrows for investment in assets like property, cannot, and needs to be controlled.
Due to the increasing pressure of gasoline prices in the world, on Monday afternoon, the inter-ministries of Industry and Trade, and Finance decided to spend the price stabilisation fund to subsidise gasoline prices.
Still, retail gasoline prices in the domestic market increased strongly. Specifically, E5RON92 gasoline price has increased by VNĐ674 to VNĐ29,633 a litre, meanwhile RON95-III gasoline increased by VNĐ669 to VNĐ30,657 a litre.
In contrast, oil prices were simultaneously adjusted down to compensate for gasoline prices. For instance, the price of diesel oil decreased by VNĐ1,097 to VNĐ25,553 a litre, while kerosene decreased by VNĐ763 to VNĐ24,405 a litre, and fuel oil 180CST 3.5S is priced at VNĐ20,598 per kg, down VNĐ962 a kg.