Price increases and the burden of controlling the CPI.

At the beginning of the year, the rapid price increases of many consumer goods are putting a heavy burden on the government's target of keeping the consumer price index at a single-digit level.

Goods and services are rising in price at all costs.

Housewives are often surprised when they go to the market these days. Prices vary from day to day, from place to place, depending on the "weather conditions" and the "whims" of the sellers.

Vendors are using the cold weather and shortages as an excuse to arbitrarily raise food prices. Even items with small price increases have risen by 5-10%; those with larger increases, like green vegetables, have doubled or tripled compared to normal days. Furthermore, a wide range of essential goods and services have also seen simultaneous price increases since the beginning of the year, making life even more difficult for low-income earners.

Many consumer goods are increasing in price every day.

For example, the price of gas increased by 24,000 VND per 12kg cylinder, and yesterday it rose by another 8,000 VND per cylinder; the price of clean water in Ho Chi Minh City increased from the 1st of this month; and fees for issuing license plates for cars and motorbikes, parking fees, etc., have also increased in the two major cities of Hanoi and Ho Chi Minh City. Along with these fees, freight rates by road, rail, and air have all increased quite significantly.

Previously, on December 20, 2011, electricity prices were also adjusted upwards by 62 VND/kWh, a 5% increase compared to the old price. Thus, right from the beginning of this new year, consumers' already meager wallets have been further squeezed after the turbulent year of 2011.

Wholesale control, inventory management

As is customary, at the beginning of the Gregorian New Year and leading up to the Lunar New Year, a wide range of goods experience skyrocketing price increases, with no effective solution in sight. According to Mr. Vu Vinh Phu, Chairman of the Hanoi Supermarket Association, there is currently speculation and exploitation of unfavorable weather conditions to drive up prices. To prevent this situation, the most fundamental solution is to balance supply and demand and facilitate circulation; reducing the number of intermediaries.

According to Mr. Phu, it is necessary to strictly control wholesale trade to dominate retail trade, especially the wholesale of essential goods such as cooking oil, meat, sugar, gasoline, iron and steel, and fertilizers… It is the wholesale segment that has been manipulating the market in recent times, something no one has mentioned.

For example, there was a time when supermarkets couldn't buy sugar directly from factories and had to go through several layers of distributors, driving up the price. Similarly, the government subsidizes domestic fertilizer production, and factories sell it to distributors at a price 5,000 VND/kg lower than the import price, but by the time it reaches farmers, the price of domestic and imported fertilizers remains the same. The distributors profit from this.
Another solution, Mr. Phu proposed, is for the State to invest in stockpiling goods and food during sensitive periods such as Tet (Lunar New Year) to be ready to release into the market to stabilize prices. However, this is not currently in place.

Sharing this view, many opinions also suggest that focus should be placed on solutions to support farmers in crop cultivation and livestock farming to increase the volume of goods in circulation, instead of just focusing on price support for distribution businesses to stabilize prices as is currently the case.

For example, Hanoi city spent over 400 billion VND on price stabilization compared to the city's total peak monthly consumption of over 25,000 billion VND, which is far too little to stabilize the market. Moreover, this support inadvertently flows into the pockets of intermediaries, while direct producers and consumers benefit very little from this policy.

From a macroeconomic perspective, the government has a strict policy of managing essential goods that are inputs to the economy, such as electricity, coal, and petroleum. People are unlikely to be satisfied with the steady increase in prices of some monopolized goods to compensate for losses, while the salaries of employees in those sectors remain among the highest in the country.

Furthermore, while the entire country is striving to control prices and stabilize the market, some essential goods have unexpectedly increased in price, creating a mentality of hoarding and speculation. Therefore, determining which essential goods should be increased in price, at what time, and by what amount to minimize the impact on the overall price level is a pressing issue.

Looking back at price management in 2011, it's clear that prices in the first half of the year were almost out of control for the authorities, deviating from the pattern of gradually decreasing inflation in the months following the Lunar New Year. Then, in the last five months of the year, the situation began to ease thanks to the decisive actions of the Government.

The lesson learned is that only with the synchronized involvement of the Government, ministries, and localities nationwide from the very beginning of the year, from forecasting supply and demand, managing, to inspecting and controlling essential goods, and implementing tight monetary and fiscal policies to reduce the money supply, can we hope to achieve the target of a single-digit increase in the consumer price index this year as set by the Government.

According to VOV