Mar 1, 2013

Vietnam - Inflation to lurk in the shadow of the economy

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High inflation during 2013’s first two months may thwart the government’s inflation target this year.

Minister of Planning and Investment Bui Quang Vinh last week said that February’s consumer price index (CPI) would grow a soft 1.3-1.4 per cent against January, when the index grew 1.25 per cent on-month.

Tran Thi Hang, vice head of the General Statistics Office, said: “This would be an increase far lower than the average rise level of 2.21 per cent recorded in every February between 2002 and 2012.”
Hang said Vietnam’s traditional Tet festival was often every February, with bigger consumption of goods and services than other points of time. But, this Tet festival saw big supply of goods and services thanks to the government’s strong measures to control price hikes, she said. “As a result, January’s CPI was low.”

However, in this year’s first two months, the accumulative CPI rise would be about 2.65 per cent, which would occupy one-third of the inflation target of around 8 per cent for 2013 carved in the Resolution on Socio-Economic Development for 2013 adopted by the National Assembly in November, 2012.

Such a CPI rise would also be equal to 41 per cent of the 6-6.5 per cent inflation target outlined by Prime Minister Nguyen Tan Dung to the international donors at the 2012 Annual Consultative Group (CG) Meeting for Vietnam in Hanoi in December, 2012.

Hoang Quoc Vuong, chairman of state-run electricity giant Electricity of Vietnam (EVN), said there would be a 7.2 per cent increase in power prices this year, from 2012’s VND1,361 ($0.065) per kilowatt hour to VND1,459 ($0.07) per kWh in 2013. He said the power price increase for 2013 would be due to a potential hike in the prices of coal and oil used for producing power.

Nguyen Huu Su, general secretary of Hanoi Small- and Medium-sized Enterprise Association, said the power price rise would push prices of all types of other goods and services up, meaning people’s lives and enterprises’ situation would become more difficult.

Meanwhile, 33 provinces and cities nationwide are expected to raise prices of healthcare services this year. In September, 2012, price hikes of medical services in many localities caused a sudden high CPI increase of 2.2 per cent. “Thus, these CPI-augmenting factors will affect the government’s efforts to rein in inflation during the coming 10 months. It will be difficult for the government to achieve its inflation target this year,” Su said.

HSBC early this month forecast that Vietnam’s inflation rate this year would be 9.5 per cent, while ANZ said it would be 8-10 per cent.

Nguyen Dat |

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