Government urges vigilance as inflation pressures mount in H2

Government urges vigilance as inflation pressures mount in H2

The Government's inflation target remains within reach despite mounting headwinds. Several forecasts suggest inflation can stay below 4.5 per cent this year if international oil prices continue to retreat. Extending domestic fuel tax incentives through year-end, along with stable electricity prices, healthcare fees and exchange rates, would offer additional relief.

Vietnamese food is increasingly diverse in varieties and packaging, meeting domestic demand. — VNA/VNS Photo

The Government has ordered ministries, agencies and local authorities to sharpen forecasting capabilities and build response scenarios to keep inflation contained.

They were told to manage prices of essential goods with caution and flexibility, warning that the room to absorb price shocks is narrowing.

Headline CPI closes in on target 

According to the Ministry of Finance, the consumer price index (CPI) rose 4.38 per cent year-on-year in the first half, while core inflation climbed 4.12 per cent. Fuel prices were the main driver, surging an average of 19.13 per cent in the wake of the Middle East conflict and contributing roughly 1.35 percentage points to headline CPI growth. 

Notably, coordinated fiscal and monetary policies, along with supply-demand balance, helped steady prices through the first half. Domestic fuel prices remained 10-15 per cent lower than in neighbouring countries, while electricity rates were held unchanged.

The National Statistics Office (NSO) said the first-half inflation picture reflected offsetting factors. Flexible fuel price management and ample food supplies eased pressures, but rising costs for household electricity, construction materials, housing and consumer services, stoked by higher input expenses and recovering demand, continued to push inflation higher.

Economist Ngô Trí Long from the Vietnam Association of Financial Consultants said inflation was under control in the first half, yet the tight spread between core and headline CPI signalled price pressures had broadened beyond volatile items like fuel and food into a wider basket of goods and services.

Speaking at the 2026 annual forum on the Việt Nam market and price trends, Phan Thị Thu Hoài from the Institute of Economics and Finance said domestic inflation is increasingly driven by a mix of factors rather than external shocks alone. Energy prices, exchange rates, logistics and food costs, monetary policy and market expectations are all fueling inflationary pressures, she said, arguing that price management now requires close fiscal-monetary coordination, a stable supply of essential goods and more proactive market forecasting.

Mounting pressure toward year-end 

Balancing the Government’s double-digit growth ambition for the remainder of the year with an annual inflation cap of around 4.5 per cent will be a tall order, particularly given continued volatility in energy and raw material costs, freight and exchange rates, and geopolitical risks buffeting the highly open economy.

Economists flagged several factors likely to intensify inflation in the second half, including the July 2026 wage hike, expiration of tax cuts on certain petroleum products after September 30, stronger demand for electricity and production inputs tied to higher growth targets, faster public investment disbursement, and scheduled rises in state-managed goods and public service prices.

These require flexible price management, careful policy coordination and contingency planning, with adjustments to administered prices calibrated and timed to avoid locking in inflation expectations, they added.

Dr. Cấn Văn Lực, member of the National Advisory Council on Financial and Monetary Policies, said the Government's inflation target remains within reach despite mounting headwinds. Several forecasts suggest inflation can stay below 4.5 per cent this year if international oil prices continue to retreat. Extending domestic fuel tax incentives through year-end, along with stable electricity prices, healthcare fees and exchange rates, would offer additional relief.

Under its updated policy scenario, the ministry said hitting the 4.5 per cent annual target would require average month-on-month CPI growth of just 0.05 per cent for the rest of the year. The scenario assumes full-year fuel prices rise about 11.85 per cent, while key administered services, such as electricity, health care and education, stay unchanged per the current adjustment roadmap.

The NSO said authorities must keep a close watch on inflation, exchange and interest rates, and financial markets in the coming months to safeguard macroeconomic stability and financial system safety. 

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