Vietnam experiences high inflation due to various factors such as rapid economic growth, expansionary monetary policy, increasing consumer demand, rising commodity prices, and supply chain disruptions. These factors contribute to inflationary pressures in the country’s economy.
Vietnam’s high inflation can be attributed to several key factors that have had a significant impact on the country’s economy. These factors include rapid economic growth, expansionary monetary policy, increasing consumer demand, rising commodity prices, and supply chain disruptions.
- Rapid Economic Growth: Vietnam has experienced remarkable economic growth in recent years, averaging around 6-7% annually. This growth has created upward pressure on prices as increased demand for goods and services outpaces supply. As a result, inflationary pressures are intensified.
“High inflation is not just a monetary phenomenon, it is primarily an economic phenomenon.” – Gary Becker
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Expansionary Monetary Policy: The Vietnamese government has implemented expansionary monetary policies to support economic growth and development. These policies involve increasing the money supply and lowering interest rates to stimulate borrowing and investment. However, this expansionary approach can contribute to inflation by fueling excessive liquidity in the market.
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Increasing Consumer Demand: As Vietnam’s economy continues to grow, consumer demand has been on the rise. A growing middle class, urbanization, and increasing disposable incomes have led to higher spending patterns. This surge in consumer demand puts upward pressure on prices, particularly in sectors such as housing, healthcare, and education.
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Rising Commodity Prices: Vietnam heavily relies on imports for various commodities, including oil, food, and raw materials. Fluctuations in global commodity prices impact Vietnam’s inflation rate. For instance, an increase in oil prices can lead to higher transportation costs, affecting the prices of goods and services throughout the country.
“High involvement in global trade exposes Vietnam’s economy to both the positive and negative effects of global price movements.” – The World Bank
- Supply Chain Disruptions: Disruptions in global supply chains, as witnessed during the COVID-19 pandemic, can significantly impact the availability and cost of goods. Vietnam’s reliance on imports makes it vulnerable to disruptions, which may result in shortages and price increases.
TABLE:
Factors Contributing to Vietnam’s High Inflation:
- Rapid economic growth
- Expansionary monetary policy
- Increasing consumer demand
- Rising commodity prices
- Supply chain disruptions
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Vietnam has undergone a dramatic economic turnaround since 1990, thanks to reforms that opened up the country to international trade. Foreign investment has helped drive Vietnam’s rapid exports growth. However, the increased automation of manufacturing is set to erode Vietnam’s comparative advantage in cheap labor, posing a challenge to the country’s current economic growth.
Other responses to your inquiry
The evidence records that the main driver of inflation in the Vietnam economy is the food inflation. Moreover, both energy and food inflation tends to have a large deviation over time. This illustrates the impact of the world commodity market on domestic inflation.
Some of the causes of Vietnam’s high inflation are externally induced such as dramatic increases in the international prices of food, fuel and construction materials have a large impact on domestic prices, but others are home-made such as the unsterilised liquidity inflows, unusually high domestic credit growth, expansionary fiscal policy, and aggressive public investment were the principal home-made causes of Vietnam’s high…
The pressure of high rate inflation on Vietnam economy in 2022
- Supply chain disruption Firstly, supply chain inflation is the main factor creating the biggest pressure on Vietnam inflation.
The inflation spiral that began in the mid-1960s also was war-related. Its roots were in the start of the Vietnam conflict, when President Johnson refused to raise taxes to finance both military operations and domestic social programs. No one since has been able to break the spiral.
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Is inflation in Vietnam high?
Response to this: Inflation falls to over one-year low in May
Inflation came in at 2.4% in May, down from April’s 2.8%. May’s reading represented the lowest inflation rate since March 2022. The decline in price pressures was largely due a stronger decline in transport prices. That said, price pressures for housing rose.
What is the problem with the economy in Vietnam?
Response: Vietnam’s economic growth target of 6.5% this year may be at risk amid a global slowdown weighing on exports, lingering crisis in the local property sector and higher interest rates hampering businesses, according to lawmakers.
Is Vietnam doing well economically?
The answer is: GDP growth is projected to ease to 6.3 percent in 2023, down from 8% in 2022, due to the moderation of domestic demand and exports. Vietnam’s economic growth is expected to rebound to 6.5 percent in 2024 as domestic inflation could subside from 2024 onward.
What is Vietnam’s inflation targeting?
GSO director general Nguyễn Thị Hương spoke to Vietnam News Agency about challenges to meeting the National Assembly’s inflation target of about 4.5 per cent.
What is the inflation rate in Vietnam?
Answer to this: In Vietnam, the inflation is still under fine management. The average CPI growth rate in the first 4 months of 2022 was at 2.1% over the same period last year. Similarly, petrol price jumped by 48.84% compared to 2021, while domestic gas price fluctuated according to world petrol price and gas price, averaging 24.6% increase in every 4 months.
What if Vietnam can’t curb inflation?
Response: Statistics show a stable situation now, but there are warning signs that if Vietnam cannot curb inflation, the situation will be insecure. In its report about the economic and financial situation of Vietnam and the rest of the world in July and the first seven months of the year, the Ministry of Finance (MOF) showed concern about inflation.
Is Vietnam a “headwind” in the world’s inflation trend?
The response is: With an inflation rate of 1.84% in 2021, the lowest since 2015, Vietnam is also a “headwind” in the world’s inflation trend up to now.
What happened to the inflation rate in Vietnam in June 2023?
The annual inflation rate in Vietnam eased to 2% in June 2023 from 2.43% in the previous month. It marked the lowest reading since February 2022, as prices dropped further for transport (-11.98% vs -8.94% in May) and post & telecommunication (-0.58% vs -0.51%).
Will Vietnam keep inflation under control?
Response to this: HANOI, Nov 5 (Reuters) – Vietnam will stick to its target to keep inflation under control and ensure macroeconomic stability, Prime Minister Pham Minh Chinh said on Saturday, as the economy faces fresh challenges.
Why is Vietnam under pressure in 2022?
The ministry pointed out that Vietnam is under pressure because the economy has high openness and inflation rates in other countries are high (because of the Russia-Ukraine conflict, Covid-19 pandemic, food and energy price increases). “Inflation is one of the highest risks for Vietnam and the world in 2022,” MOF said.
What happened to the inflation rate in Vietnam in June 2023?
The response is: The annual inflation rate in Vietnam eased to 2% in June 2023 from 2.43% in the previous month. It marked the lowest reading since February 2022, as prices dropped further for transport (-11.98% vs -8.94% in May) and post & telecommunication (-0.58% vs -0.51%).
Is Vietnam a “headwind” in the world’s inflation trend?
With an inflation rate of 1.84% in 2021, the lowest since 2015, Vietnam is also a “headwind” in the world’s inflation trend up to now.