The Vietnamese Consumer Price Index this month increased 0.4 percent over the previous month and 7.6 percent year-on-year, which can tell us a lot about trends and policies.

The rate of inflation in the first six months this year is lower than that of last year, just 4 percent compared to 5.2 percent.

During that time, the food sector increased much less correspondingly, at just 4.9 percent over last year’s 7.7 percent.

It begs the question “why”?

Economic growth brings with it high living standards, causing a surge in service and industry demands, which far outweighs that in the food sector.

There are other reasons: bird flu and foot-and-mouth disease.

While the state has curbed price increases in certain sectors, Vietnamese enjoy cheap products from ASEAN thanks to reduced tariffs.

Interest rates from Vietnamese banks are high, rising to 9 percent per year. It inadvertently enlarged cash deposits at a faster rate than cash withdrawn.

Global comparison

The 4 percent increase in consumer prices is high.

In absolute terms, prices have increased 23.4 percent since late 2003.

Compared with consumer prices in developed countries like the US where over 80 percent of its GDP is spent on consumer goods, Vietnam’s rates are high.

While US inflation increased just 2.5 percent over 10 months, its Federal Reserve continuously increased interest rates on dollar accounts to 5 percent.

The rate is expected to increase again next month in the Federal Reserve’s bid to fight inflation.

Meanwhile, Vietnam has targeted this year’s economic growth rate at 8 percent. During the first six months, we have managed to grow 7.6 percent.

That means more investments and cash are needed, causing more inflation and price increases in the months to come.

World oil prices are high. Crude oil stands at $70 per barrel, causing products and oil-related services to increase in price accordingly.

Vietnamese farmers have been hit the hardest with bird flu, foot-and-mouth disease, typhoons and landslides.

To top it all off, input prices [petrol, fertilizers] have increased but an according price rise has yet to be seen in farm produce prices.

The front line sectors of society always seem to be hit the hardest, while high inflation will impact consumers and Vietnam’s global competitiveness in the long run.

Source: Thanhniennews.com