Prime Minister Nguyen Tan Dung has stated that the government will not allow high inflation to happen again.

In addition, Le Duc Thuy, Chairman of National Financial Supervisory Committee, said it is very unlikely that inflation with more than 1 digit will occur this year, implying that inflation is under control.

PM Nguyen Tan Dung urges ministries and agencies to prevent high inflation rate.

Inflation became one of the most important topics which was discussed during the regular meeting of the Government in February. Ministries of Planning & Investment, Finance and the State Bank as well as the National Financial Supervisory Committee also made reports on this issue at the meeting.

According to Thuy, who is also the Former Governor of the State Bank, price escalation during Tet and the warning about high inflation due to economic stimulus packages has made many people worried about high inflation recurring.

Under such circumstances, the government needs to seriously consider this issue and whether it’s possible to gain the targeted inflation rate at 7% set by National Assembly.

Government members and the committee agreed that an increase in prices by 3.35% during the last 2 months was not overly high. It’s approximate to the same period of previous years from 2003 to 2009. The inflation rate during those years was 3.1%, 4.1%, 3.6%, 3.3%, 3.2%, 5.94% and 1.49% respectively. The inflation rate in 2008 was the highest but dropped in 2009.

Thuy added that price increases during the first two months of a year accounts is normal and accounts for 40% of the price increases for the entire year. Thus, it’s not necessary to assume there will be a recurrence of high inflation, but it shouldn't be disregarded.

Referring to price increases in March, Thuy said that it can be higher than the same period of past years because there were price increases of petrol, electricity and currency exchange rates.

The committee forecasted that Consumer Price Index (CPI) this March will go up by 0.5-1%. The Ministry of Planning & Investment predicted that the number will be 1% and the Ministry of Finance said that it will be 0.5-0.75%.

Thuy said that if the CPI increases by 0.5-1% in March, then the CPI hike of the first quarter will be about 4% and the CPI increase for the entire year will be about 8-9% which is the target of the National Assembly. The government is determined to achieve these goals.

In addition, there’s a decrease in prices of food and Thuy said the CPI increase for March may be less than what we predicted.

Thuy thought that price control was not handled properly, so many manufacturers boosted up their prices too much. The government realised this issue and will resolve it.

Petrol price control will be tightened in order to avoid continuous increases.

Furthermore, the government will also have solutions to curb the domino effect in price increases. Thuy cited the example of steel prices having increased by 5 - 10% following electricity price rises. He said this was unreasonable as electricity costs could not account for the 5 - 10% rise in steel prices, especially when electricity went up only 6.8% on average.

Nguyen Xuan Phuc, Head of the Government Office said that prices of essential goods such as steel, cement and some others, will be strictly controlled. Prices of electricity and coal serving electricity generation will not go up anymore this year.