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Policy opinion II

From 2021, global inflation has kept increasing, with an estimation of 3.8%, the highest in 10 years. In the US, the average consumer price index (CPI) in 2021 increased by 4.7%, the highest rise in nearly 40 years. By the end of 2021, the global inflation rate reached 7% and grew to 8% by March 2022. Sharp increase in prices of input materials especially for energy and metals, and supply chain disruption (due to the impact of the Russia-Ukraine conflict) are considered the main causes for high inflation in many countries.

In early 2022, Vietnam controlled inflation relatively well despite global inflation. Vietnam's average CPI in 2021 increased 1.84% compared with last year, the lowest in the past 6 years. The effective control of the epidemic and inflation is considered to be Vietnam’s achievement in macro-economic management in the first half of the year and the main drive for economic recovery in the second half of 2022.

However, Vietnam’s economy has to cope with some external risks. Many countries in the world have intensely tightened monetary policies in responding to high inflation, for instance the US Federal Reserve (Fed) raised interest rates by 0.75 percentage points in June of 2022 in the USA, the highest increase since 1994. When there is a tight monetary policy, currencies of many countries will lose their values against the US dollar. VND is, meanwhile, relatively stable against the dollar so its export competitiveness will be decreased. Due to inflationary pressure and the policies of the State Bank to control inflation, the possibility of raising deposit and lending interest rates is still a problem until the end of this year. In the changing world economy, it is difficult for the Government to keep inflation rate at 4% in 2022 as its proposal to the National Assembly. This study will, therefore, evaluate Vietnam's inflation in the first half of 2022, examine the causes and recommend measures to control inflation according to the economic development plan in the second half of 2022.

With the financial support from KAS Vietnam, the Vietnam Institure of Economic and Policy Research carries out a comprehensive report to assess Vietnam's inflation in the first half of 2022, forecast the end of 2022, and prescribe policy recommendation for inflation control. The report focuses on the following aspects:

- Assessing the inflation situation in Vietnam in the first half of 2022 and forecasting the end of 2022.

- Discussing policies to contain inflation applied in Vietnam and other countries in recent years.

- Making policy recommendations to reduce  pressure resulted from high inflation on the economy