VAT down 2%, wages up 20.8%

From July 1, according to Decree 24/2023 issued by the Government, the basic salary for civil servants, public employees, and armed forces will be adjusted to increase from VND 1.49 million/month to VND 1.8 million/month, equivalent to an increase of 20.8% compared to the current basic salary. Similarly, according to the Joint Resolution just passed by the National Assembly on the afternoon of June 24, from July 1, value added tax (VAT) will be reduced by 2%, to 8% by the end of this year. However, the tax reduction does not apply to telecommunications, real estate, securities, insurance, banking, metals, refined petroleum, mining, etc. and items subject to special consumption tax.

Ms. Tran Thu Hoai (residing in District 3, Ho Chi Minh City), an accountant at a shipping company, said that the increase in basic salary by more than 20% creates a rather optimistic mentality for cadres, civil servants and public employees. She said: "My current salary is more than 9.089 million VND, according to the salary coefficient of 6.1, from July 1 it will increase to 10.98 million VND. The income increases by nearly 2 million VND/month, a family of 2 also gets an additional 4 million VND/month. After 4 years (from July 1, 2019) of increasing that level, the average increase is only 500,000 VND/month per year, but that is much better for the current mentality of tightening spending".

Mr. Nguyen HT (residing in District 7, Ho Chi Minh City), a customs inspector, excitedly said: "The increase in basic salary is so happy". Mr. HT's current basic salary is nearly 11.4 million VND/month, after July 1 it will increase to 13.75 million VND/month. "Salary increases and VAT also decreases by 2% at the same time, so spending can increase a little. For example, there will be more times to go out to eat, and household necessities will be purchased more. In general, for salaried workers, from senior experts to civil servants, hearing about the increase makes them feel "happy". That is a psychological factor, which will help stimulate consumption in the coming time", Mr. HT said.

Notably, the survey shows that the prices of many essential goods on the market are decreasing sharply compared to the same period last year. For example, vegetables such as lettuce, watercress, and mustard greens have decreased by about 20-30% compared to the same period last year, and spices have also decreased by 10-20%. Retail pork prices have decreased by more than 16% from VND180,000/kg to VND150,000/kg of pork belly; industrial chicken eggs have decreased from VND40,000/dozen to VND30,000/dozen; Cabbage decreased by 35 - 40%, an average of 50,000 VND/kg, now down to 30,000 - 35,000 VND/kg... Notably, compared to June 2022, the current gasoline price has decreased by 33%, from more than 32,000 VND/liter to 22,000 VND/liter; diesel decreased by 39%, from 30,000 VND/liter to more than 18,000 VND/liter; gas is 16.6% lower.

Mr. Pham V. Viet (residing in Thua Thien-Hue), owner of a freight transport business, said that thanks to the decrease in gasoline prices, freight rates have decreased by more than 5% compared to the beginning of this year, and compared to the same period last year, they have decreased by 15 - 25%.

Ms. Hoang Thi Kim Phuong (residing in District 11, Ho Chi Minh City), a retired tax official and "housewife expert, goes to the market every day", also shared the same opinion that the current price of goods compared to the same period last year has decreased, especially vegetables, fruits, meat and fish in the market. "But the price of a bowl of pho and a plate of noodles at the restaurant has not decreased. The operation of the restaurant market is still very slow, input prices have decreased a lot but the selling price of a bowl of pho increased by 5,000 VND before Tet, up to 45,000 VND, and after Tet it remained at that level. Meanwhile, at the same time last year it was 35,000 VND/bowl. But it is true that the price of consumer goods has never decreased before the time of increasing the basic salary like now. Hopefully this decrease will continue until the end of the year to make it easier for salaried workers. In fact, gasoline has decreased all year, the price of goods has decreased but not proportionally", Ms. Phuong said.

"Inflation is lurking"

Associate Professor Dr. Dinh Trong Thinh, senior lecturer at the Academy of Finance, said that the goal of increasing the basic salary is to increase income and improve the level of enjoyment of workers. This goal cannot be achieved if inflation is not effectively controlled, the consumer price index and prices of essential goods increase in parallel or increase faster than the increase in salary. "But according to our assessment, inflation this year will be difficult to increase, within the range of 3.5 - 3.8%, within the level set by the National Assembly and the Government," Mr. Thinh predicted.

This expert analyzed: Inflation decreased despite the increase in wages thanks to the reduction in VAT, causing the price level of essential goods to decrease. In general, prices decreased by 1.5 - 1.7% compared to the previous period, which is a factor contributing to reducing inflation. In addition, increasing wages and reducing taxes to stimulate demand at this time is very good for export companies that are facing difficulties in foreign markets, giving them a better chance to return to the domestic market. Observations show that the main export markets in May to June have a better increase in orders. Thus, the ability to export is more promoted in the last 2 quarters of the year. Information also shows that some businesses expanding their export markets to many countries are increasing orders significantly in the past 2 months.

"Thus, increased production, increased income, plus increased new income... will boost domestic consumption. Inflationary pressure is noteworthy, but world prices have not increased in recent times, and many commodities are even decreasing significantly compared to last year; world oil prices have fluctuated within a controllable range, so there is no need to worry. What we are very concerned about is that management agencies with experience in managing commodity prices in the market in recent times need to monitor more regularly and closely, and if there are signs of a 1% increase in wages and 2% increase in prices, they should immediately warn," said Associate Professor, Dr. Dinh Trong Thinh.

Meanwhile, Associate Professor Dr. Nguyen Thuong Lang (Institute of International Trade and Economics) predicted that there would be a new price level for goods and wages formed by increasing income and reducing taxes, then spending will certainly increase. That is also the goal of policymakers to stimulate demand in the last 6 months of the year and this is a very timely and noteworthy policy. On the other hand, according to experts, lending interest rates are also starting to decrease, and it is expected that business costs will decrease in the last 2 quarters of the year. Businesses will have less difficulty in input costs, helping to stabilize the cost of manufactured goods. In addition, consumer spending is forecast to increase, which is a double impact on aggregate demand. On the other hand, "the risk of price increases due to increased money supply in circulation when money flows out of banks, wages increase, pushing more money into circulation. Inflation is likely to lurk. Therefore, it is necessary to have inflation control tools ready to respond promptly in the fourth quarter of this year", Dr. Lang recommended.