Vietnam - Petrol prices likely to spur inflation

HA NOI — Increasing costs of some essential goods was likely to have a knock-on affect on the consumer price index (CPI) in August and the following months, after it fell slightly during June and July, predicted experts.

Since early July, costs have slowly been creeping up, with oil and gas prices leading the way. Petrol products have jumped by VND1,500-2,400 (US$0.0714-0.1143) per litre on average.

In addition, water prices have increased by 25 per cent, gas is up by 15 per cent, and power has leapt 5 per cent. Hospital and school fees have also jumped.

Vo Tri Thanh, deputy director of the Central Institute for Economic Management, said that Viet Nam was in the process of international integration, so oil and gas price fluctuations on the global market would be felt here too, putting pressure on the Government's target to curb inflation.

Economist Vu Dinh Anh said that recent increases in the cost of essential goods would push CPI up in August.

"Higher petrol prices will have a direct impact on transportation costs and people's lives. However, they are unlikely to have an immediate effect in August because price surveys are usually completed at the start of the month, and logistics companies only put their prices up on August 15," Anh said.

According to the Ministry of Finance's Price Management Department, August CPI would inch up, partly due to monetary loosening policies applied over the past two months.

Director of the Ministry of Industry and Trade's Domestic Market Department Vo Van Quyen stressed that the impacts would be small and inflation for the year would stay in a single digit.

Thanh predicted that under normal circumstances, inflation would be from 7-8 per cent this year, but if there were unexpected price hikes in the local and global markets, inflation could reach 9.9 per cent.

Nguyen Duc Thanh, director of the Ha Noi National Economics University's Economic and Policy Research Centre, echoed the same thoughts, saying that annual inflation could be kept below 10 per cent because oil prices only affected certain industries.

The outlook for the rest of the year is slow economic growth and poor credit growth, so inflation is unlikely to break into double-digits.

VNS

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