The latest drop in petrol prices will help keep a lid on inflation in the remaining months of the year, said the director of the Finance Ministry’s Market and Price Research Institute(MPRI), Nguyen Khanh Long.

The recent cut to the retail price of fuel of VND1,000 per litre was not substantial, Long noted, but from the perspective of the entire economy, it will represent significant savings for people.

The deputy head of the ministry’s Price Control Department, Nguyen Tien Thoa, said that lower fuel prices would also have a positive impact on the State budget because many units would enjoy lower transportation costs.

Nevertheless, there has been little sign that transportation enterprises, including taxi firms, were in a rush to cut their charges. Taxi firms were still reportedly charging VND7,500-8,500/km. Car rental remained at 15-25 per cent higher than before fuel price hikes earlier this year.

Firms have argued that they could not adjust charges at a time when world oil prices were fluctuating so irregularly, claiming it would just create disorder in consumers’ mental habits. It’s easy to lower charges but then difficult to raise them again without customers complaining, they have explained.

Inflationary pressures

The closing months of the year are always a time when consumer spending increases and inflationary pressures tend to be highest.

The Price Control Department forecasted that the consumer price index (CPI) this month would be about 0.6 per cent against 4.8 per cent in the first eight months this year. This means that the economy could absorb a 2 per cent rise in the index in the three remaining months of the year.

The CPI for the whole year was predicted by the department to range from 7-7.3 per cent, a peg lower than the GDP growth rate targeted by the National Assembly.

A new higher minimum wage will also take effect on October 1, and some worry that the prices of many goods and services will go up accordingly.

"The salary adjustment, in theory, should not affect prices because we are not putting more money into circulation," said Thoa.

The deputy director of the MPRI Ngo Tri Long, disagreed. "The increase of salary will stimulate demands and push up prices," Long said.