Fuel prices set to put pressure on inflation
Hanoi (VNS/VNA)
- Increases in environmental protection taxes on petroleum from the beginning
of next year would weigh heavily on inflation, especially as fuel prices rise
worldwide, according to the Vietnam Institute For Economic and Policy Research
(VEPR).
Nguyen Duc Thanh, VEPR’s Director, said at the launching of the report about
the Vietnamese macro-economy in Hanoi on October 10 that inflation in 2019
would exceed the 4 percent target set in recent years.
“The Government should have strong measures to control inflation next year,” Thanh
said.
With environmental protection taxes on petroleum to be raised from 3,000 VND to
4,000 VND per litre from next year, VEPR estimated this increase might push up
inflation by 1.6 percentage points within 12 months.
“The pressure on inflation next year requires the State Bank of Vietnam to be
cautious 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 0.07-0.09
percent.
For inflation this year, Thanh said: “The Government’s target of keeping
inflation under 4 percent this year is within reach if there are no big fuel
price shocks in the quarter.”
VEPR projected inflation to be at 4.25 percent in the last quarter of this
year.
Deputy Prime Minister Vuong Dinh Hue at a meeting of the Price Management
Steering Committee at the end of September asked efforts to keep inflation at
3.7-3.95 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 of
controlling inflation at around 4 percent.
The National Financial and Monetary Policy Advisory Council
proposed that the inflation target should be set at around 4 percent in 2019
rather than below 4 percent.
Thanh said economic growth will be impressive, adding that VEPR predict it to
be at 6.85 percent for 2018, far exceeding the National Assembly’s target at
6.5-6.7 percent.
“However, in the context of escalating trade war and rising protectionism, the
Vietnamese economy might face uncertainty from shocks in the global markets,”
he said.
The Fed’s interest rate hikes would create pressure on the domestic currency
and exchange rates, he said. While, the use of foreign currency reserve to
stability exchange rates was only short-term and might bring risks, given the
thin reserve of Vietnam, Thanh said.
“The US - China trade war is an opportunity for Vietnam to speed up reform and
enhance resilience to global risks, including reducing budget deficit,
increasing trust surplus, improving business climate and simplifying administrative
procedures,” Thanh said.-VNS/VNA