VINACHEM

Experts warn of inflation threats despite Vietnam’s strong first-half price control.

Although Vietnam has kept inflation within target during the first half of 2025, external factors such as exchange rate fluctuations, oil prices, and geopolitical tensions are casting uncertainty over inflation prospects in the second half.

CPI shows moderate increase, pressure remains manageable

According to the General Statistics Office under the Ministry of Finance, Vietnam's consumer price index (CPI) rose by 3.27% year-on-year in the first six months of 2025 - slightly higher than the 2015-2024 average of 2.81%. Core inflation stood at 3.16%.

Dr. Nguyen Duc Do, Deputy Director of the Institute of Economics and Finance, assessed that although inflation rose, pressure remained manageable. The main contributors were medical services and housing-related costs such as electricity, water, and construction materials - essential goods tied to daily life. Meanwhile, declining global commodity prices and a 1.57% drop in import prices helped ease domestic inflation.

Dr. Do noted that in the second half of 2025, inflationary pressure is expected to remain moderate. Sluggish export performance, particularly to the US due to new tariffs and weak global growth, is likely to increase domestic supply and ease price pressures.

Commodity prices are also declining amid signs of a global slowdown. Assuming monthly CPI increases average 0.27% - in line with the 2015-2024 second-half average - the full-year inflation rate could be around 3.4%. If global trade tensions deepen, triggering an economic slowdown, annual inflation might fall to 3%.

"If projections hold, 2025 would mark the 11th consecutive year Vietnam successfully maintains inflation below 4%," said Dr. Do.

Inflation risks on the rise

Still, several inflationary risks loom. Dr. Do pointed to credit growth and exchange rate pressures. The government has targeted 16% credit growth for 2025 and tasked the State Bank of Vietnam with maintaining low interest rates to support 8% GDP growth. This could result in money supply expanding faster than nominal GDP, putting upward pressure on prices.

Vietnam's exports also face increased tariffs from the US, which could pressure the exchange rate and impact inflation. According to Nguyen Thu Oanh, Head of Price and Service Statistics at the General Statistics Office, global inflation remains under pressure despite some easing since the 2022-2023 peaks.

She highlighted volatile commodity prices, rising oil due to geopolitical conflicts and OPEC+ supply cuts, higher shipping costs from global disruptions, and climate-driven risks to food prices.

Supply chain shifts and local production policies are also pushing up production costs. Since Vietnam depends heavily on imported raw materials, global price hikes, compounded by a stronger US dollar, could increase import costs and domestic prices.

Other inflationary drivers include public spending from economic stimulus programs, strong tourism recovery, and a rebound in domestic demand. If credit growth accelerates, it could trigger demand-pull inflation.

Policy coordination essential for inflation control

Experts agree that macroeconomic policies must be tightly coordinated and proactive. Oanh stressed the need for close monitoring of global inflation trends and prompt warnings to protect domestic price stability.

Authorities must also keep essential goods - such as food, fuel, and gas - under control, especially during holiday seasons, and clamp down on speculation and misinformation.

Flexible monetary tools should be employed to meet inflation targets while supporting production and livelihoods. Dr. Nguyen Quoc Viet, former Deputy Director of the Vietnam Institute for Economic and Policy Research (VEPR), emphasized that global energy prices remain a major risk. If oil prices spike, domestic fuel costs and production inputs would rise, increasing overall price levels. Rising international transport costs also pose a threat.

To mitigate these risks, Viet recommended diversifying supply chains and maintaining domestic energy price stability through adaptive tax policies. He argued that macroeconomic stability depends not only on skillful monetary policy, but also on ensuring steady supply, market confidence, and economic resilience. – Source: VNN