New price hike wave rushes down
In principle, the petrol price increase would lead to the price increases of many other goods and services. People understand that they have to cope up with a new price hike wave.
Gas was the first product which saw the prices skyrocketing in 2012. The gas price has increased by nearly 100,000 dong per 12 kilo tank to 500,000 dong, the highest ever price increase, which has shocked all the housewives.
The price hike wave has become more raging when the Ministry of Finance on March 7, announced the petrol price increase by 10 percent, which is also a sharp increase. In fact, the price increase was foreseeable, but no one could imagine that the price would skyrocket by 2100 dong per liter.
The move by the Ministry of Finance to raise the retail petrol price has dashed all hopes of a controlled inflation and interest rate reduction—as promised by the State Bank. Worries have been raised that the petrol price increase would trigger a new wave of price increases of other goods and services.
Meanwhile, people are expecting to see the impacts of the electricity price increase decision made in late 2011. The five percent electricity price increase would have severe impacts on the inflation. Experts have estimated that the increase would make the inflation increase by 3.69 percent more.
It is very likely that the electricity price would increase further in 2012, as the Electricity of Vietnam repeatedly complains that the current prices cannot cover the production costs. Though anticipating the bad influences of the electricity price increases, the government had to nod two times to the power price increase proposals in 2011.
While the big guys have threatened to raise the input material prices further, consumer goods have become more expensive already. Dairy products have increased by 3-10 percent in prices, cosmetics 5-10 percent, while the bird flu epidemics and bad weather have also made people feel insecure with the fear for meat short supply. Meanwhile, people have been informed that the fees for more than 400 healthcare services would increase from the next month.
Which scenario for inflation?
The government of Vietnam earlier this year stated that the inflation rate in 2012 would be curbed at one-digit level. The consumer price index increase of 16,4 percent by February 2012, has been praised as the initial achievement for the efforts to control the inflation.
However, analysts have pointed out that the new petrol price increase would be a hard pressure on the fight against the inflation.
No official calculattions have been released about the possible impacts of the petrol price increase on the consumer price index (CPI). However, everyone knows that the CPI increase generated by the move would be very high.
One year ago, in March 2011--when announcing the petrol price increase from 19,300 dong to 21,300 dong per liter, the Ministry of Finance forecast that this would make the CPI increase by 0.4 percent more.
In such conditions, the State Bank of Vietnam has instructed commercial banks to slash interest rates, and sources have said that the central bank has put a big amount of money into circulation. It is too early to say that Vietnam has begun loosening its monetary policies, but once it pumps more money into circulation, the risk of high inflation would become higher.
Dung Ha
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