The increase in oil prices in the world market as well as in Vietnam in the first quarter poses a huge challenge for the economy. (Photo: Vietnamplus)
"Vietnam's economic growth is likely to reach the target of 6.5% in 2022, but controlling inflation below 4% is difficult to achieve."
The information was shared by Associate Professor, Dr. To Trung Thanh, Head of the Department of Scientific Management under the National Economics University at the National Science Conference to assess Vietnam's economy in 2021 and prospects for 2022, organized by the National Economics University in Hanoi on April 25.
Inflationary pressure is broad
Associate Professor, Dr. To Trung Thanh said that the prices of basic commodities continued their upward trend. The Russia-Ukraine conflict caused energy prices to escalate, greatly affecting domestic production costs, putting great pressure on the country's economic inflation rate in 2022.
Global inflation increased at the same time, causing inflation in Vietnam. The money market saw the money supply (M2)/GDP and credit/GDP ratios high compared to other countries in the region. Domestic economic growth is still low and these factors have contributed to the pressure on inflation risk.
In addition, experts in the first quarter said that oil prices in the world market as well as in Vietnam have increased sharply, posing great challenges to the economy.
According to Dr. To Trung Thanh, a 45% increase in petrol prices increases the consumer price index (CPI) by about 0.6% and the industrial producer price index (PPI) by about 2%. When the implemented environmental tax is reduced (from April 1st), gasoline prices increase by about 41% and directly affects consumer prices by 0.5%, the industrial production price index increases by 2.2%.
Growth to meet expectations
As Covid-19 fades and economic recovery support packages are released, Vietnam's economic growth prospects can reach 6.5% in 2022. However, a driving force for economic growth comes from the external economic sector, contributing to the processing-manufacturing and export sectors, according to a report released at the National Science Conference.
Investment from the private sector is still low due to COVID-19, thus an enhanced public investment sector will boost economic growth. On the other hand, reopening of the economy will provide a quick recovery in the service sector and contribute to economic growth.
On that basis, the report recommends that the Government should take three basic points of view when making policies. Firstly, policies need to focus on recovery and sustainable economic development in the context of "living with COVID-19”.
Second, to ensure internal equilibrium of the economy, the Government needs to implement fiscal and monetary policies towards aggregate demand in the short term to push the economy back to its potential position. However, a cautious approach to loosening policy should avoid the risk of macroeconomic instability.
Finally, the Government’s policies should prioritize resources to the business sector to create conditions for this sector to recover and develop after the pandemic. Especially those that have a great spillover effect on the economy.
Regarding policies to support businesses, the report said that it is necessary to support the right beneficiaries and be more practical. The Government needs to narrow the beneficiaries of support policies based on the degree of impact by the pandemic.
The expansion of fiscal support, the research team recommends, should target a stronger business sector, focusing on the two biggest difficulties facing the business community, which are supply chain disruptions and increase in production costs./.
