The soaring prices of essential goods are challenging Vietnam despite its effective implementation of measures to curb inflation and stabilize the macroeconomy.
Illustrative photo - Source: VOVNews
In the first two months of this year, the consumer price index (CPI) dropped to a record low of 2.38 percent while the interest and exchange rates remained stable and the stock market showed positive signs of recovery.
However, the increasing prices of coal, electricity, petrol, and basic salaries are still putting a lot of pressure on the Government’s efforts to contain inflation.
In early March, the prices of petrol and gas rose by 10 percent to VND22,900 (US$1.1) per litre and VND50,000 (US$2.5) per 12-kg cylinder, respectively. The price of electricity is also forecast to increase by 10-15 percent.
The Ministry of Finance (MoF) estimates that the CPI will experience a 0.37 percent increase if electricity goes up by 5 percent in price.
Since the beginning of the year, many businesses have had to stop operating due to soaring input costs and industrial growth of 3.9 percent, a record low in many years.
Nguyen Tien Thoa, Director General of the MoF Price Management Department, said synchronous measures are needed to maintain the inflation rate at less than 9 percent.
It is crucial to control the prices of goods and services, such as electricity, gas, petrol, and hospital fees, he said.
Former Minister of Trade and Member of the National Advisory Council for Financial and Monetary Policies Truong Dinh Tuyen said the current credit interest rates are still too high and inaccessible to businesses.
According to the Advisory Council, Vietnam should focus on curbing inflation and improving liquidity by reducing bank deposit and loan interest rates.
It seems difficult to maintain the single-digit inflation rate if the price of petrol keeps increasing. And the authorities will have to do their best to meet the people’s expectations.
How to keep the rate of inflation at around 6 percent in the remaining months of 2012 remains an open question.