Vietnam has succeeded in containing the inflation despite the high inflationary pressure on the economy, according to Deputy Minister of Finance Vo Thanh Hung.

Deputy Minister of Finance Vo Thanh Hung. Source: MoF

In the first quarter of 2022, Vietnam’s consumer price index, the main gauge of inflation, rose by 1.92% year on year.

According to Hung, such an expansion rate remains moderate taking into account the high inflation around the world.

“Fiscal policies such as tax cut and freezing of payment have been supportive to the overall efforts of keeping inflation at bay,” Hung told the local media.

In February, inflation in the US expanded by 7.9% year-on-year, the highest level seen in January 1982, while that in the UK rose to a 30-year high of 6.2% during the same month.

Countries in the Southeast Asian region also saw inflation go up in February.

On measures to curb rising inflation, Hung pointed out the National Assembly (NA)’s decision to cut the value-added tax (VAT) by 2% for services and goods, as well as further reduction in taxes and fees on other products, including a lower registration fee for domestic cars and an environmental protection tax cut on jet fuel prices.

In the latest move, the NA decided to slash the environmental protection tax on gasoline and petrol products by 50%, which directly led to a reduction of VND2,200 per liter of gasoline, and VND1,100 per liter of diesel, mazut, or kerosene products.

“It is estimated that total cut in taxes and fees would be around VND88-90 trillion ($3.8-3.9 billion),” Hung said.

In addition, the MoF is planning to propose a delay in the payment of taxes and land rental fees worth VND135 trillion ($5.9 billion) in the next nine months.

“This is seen as a loan with 0% interest rate for businesses so that part of their financial difficulties could be relieved,” Hung added.

To ensure the inflation stays within the 4% target set by the NA, Hung stressed the necessity for Vietnam to continue reducing the impacts of cost-push inflation; promote the aggregate supplies; ensure macro-economic stability.

“The MoF would continue to monitor the market situation, especially prices of key commodities for timely intervention if needed,” Hung said.

Principal Country Economist of the ADB in Vietnam Nguyen Minh Cuong told The Hanoi Times the Government’s recent cut in environmental protection tax on petrol products came at the right timing to relieve inflationary pressure on the economy.

“As room to further maneuver fiscal and monetary policies has been limited, price management is a key tool for the government, especially prices of petroleum products,” he said.

Cuong, meanwhile, noted a slowing global recovery, a surge in global oil prices due to the Russia-Ukraine conflict would directly affect Vietnam’s external trade and domestic oil prices, subsequently impacting inflation.

“Uncertainties in the global financial markets and the withdrawal of monetary and fiscal accommodation by advanced economies would weaken the dong, the local currency, rendering imports more costly and putting additional upward pressure on inflation,” he concluded.

ADB’s latest report on Vietnam’s economic outlook forecast that inflation would remain around 3.8% in 2022, within the target, and accelerate to 4% in 2023.