Experts have warned fuel price hikes will put pressure on inflation next year (Photo: VNA) Hanoi (VNS/VNA)- Increases in environmental protection taxes on petroleum from the beginningof next year would weigh heavily on inflation, especially as fuel prices riseworldwide, according to the Vietnam Institute For Economic and Policy Research(VEPR).
Nguyen Duc Thanh, VEPR’s Director, said at the launching of the report aboutthe Vietnamese macro-economy in Hanoi on October 10 that inflation in 2019would exceed the 4 percent target set in recent years.
“The Government should have strong measures to control inflation next year,” Thanhsaid.
With environmental protection taxes on petroleum to be raised from 3,000 VND to4,000 VND per litre from next year, VEPR estimated this increase might push upinflation by 1.6 percentage points within 12 months.
“The pressure on inflation next year requires the State Bank of Vietnam to becautious with money supply and credit policies,” Thanh added.
Previously, the National Assembly Finance and Budget Committee, however,estimated that tax hikes on petroleum would push up CPI in 2019 by 0.07-0.09percent.
For inflation this year, Thanh said: “The Government’s target of keepinginflation under 4 percent this year is within reach if there are no big fuelprice shocks in the quarter.”
VEPR projected inflation to be at 4.25 percent in the last quarter of thisyear.
Deputy Prime Minister Vuong Dinh Hue at a meeting of the Price ManagementSteering Committee at the end of September asked efforts to keep inflation at3.7-3.95 percent in 2018, urging close watch on global prices updates,especially oil prices and the impacts of unpredictable weather.
Hue also asked relevant ministries to plan for 2019 with the goal ofcontrolling inflation at around 4 percent.
The National Financial and Monetary Policy Advisory Councilproposed that the inflation target should be set at around 4 percent in 2019rather than below 4 percent.
Thanh said economic growth will be impressive, adding that VEPR predict it tobe at 6.85 percent for 2018, far exceeding the National Assembly’s target at6.5-6.7 percent.
“However, in the context of escalating trade war and rising protectionism, theVietnamese economy might face uncertainty from shocks in the global markets,”he said.
The Fed’s interest rate hikes would create pressure on the domestic currencyand exchange rates, he said. While, the use of foreign currency reserve tostability exchange rates was only short-term and might bring risks, given thethin reserve of Vietnam, Thanh said.
“The US - China trade war is an opportunity for Vietnam to speed up reform andenhance resilience to global risks, including reducing budget deficit,increasing trust surplus, improving business climate and simplifying administrativeprocedures,” Thanh said.-VNS/VNA
