VietNam Business: inflation

Showing posts with label inflation. Show all posts

Saturday, February 12, 2011

Recent price increases raise inflation jitters

Recent price increases raise inflation jitters Prices of consumer goods saw the most rapid hike in four monthsp this September, raising fears about spiking inflation late this year.

Prime Minister Nguyen Tan Dung has asked ministries and relevant authorities to “intensify” measures to stabilize commodity prices and help the country maintain its economic and inflation targets.

He ordered the Ministry of Industry and Trade to study production and distribution systems to ensure a balance between the supply and demand of essential commodities and services through the end of the year. The country will also make efforts to keep prices of electricity and coal stable.

In Hanoi, prices on some 300 items, including confectionery products, milk and sugar, rose by 3 to 10 percent in September, according to the Hanoi Supermarket Association.

The association’s chairman Vu Vinh Phu said the prices of essential food items have increased two or three times compared to those of two to three years ago. In the same period, local incomes have risen by just 25 percent.

Phu said the prices of consumer goods will see stronger increases from now until Tet in January 2011 due to holiday demand. “Prices of hundreds of consumer products increase every day,” he said.

Consumer prices climbed 8.92 percent in September from a year earlier, compared with an 8.18 percent advance in August, according to a report issued by the General Statistics Office. Prices rose 1.31 percent in September over the previous month.

Nguyen Thi Ngoc Van, head of the office’s general department, said factors such as the increase in the price of gasoline and school fees, which contributed to rising inflation last month, will continue to affect the consumer prices in the months ahead.

The devaluation of the Vietnamese dong will further drive the price of imported products higher, raising business input costs as well as consumer prices, she said.

“Most imported products have seen a price hike since the dollar increase,” said Vu Thi Hau, deputy director of Nhat Nam Company, which owns the supermarket chain, Fivimart. “But food prices experience bigger year-end increases than other products.”

Vu Dinh Anh, deputy director of the Institute of Market and Price Research, said the demand for imported products is expected to increase from now until the end of this year, while the dollar exchange rate is also expected to rise at both commercial banks and black market exchange locations.

This will only add to the inflationary pressures on the country’s economy.

Nguyen Xuan Phuc, chairman of the Government Office, said Vietnam will continue to tighten control over consumer prices through the end of the year as the country strives to keep inflation at 8 percent. He said it is necessary to keep an eye on milk and medicine prices in particular.

In a recent report, the Asian Development Bank predicted that Vietnam’s inflation would reach 8.5 percent this year and 7.5 percent next year.

These forecasts are down slightly from April’s outlook, owing to improvements in macroeconomic conditions and moderate growth in credit, the bank found. However, large swings in inflation, together with expectations of dong devaluation, suggest that even the forecasts are not firmly anchored.

Friday, February 11, 2011

Recent price increases raise inflation jitters

Recent price increases raise inflation jitters Prices of consumer goods saw the most rapid hike in four monthsp this September, raising fears about spiking inflation late this year.

In Hanoi, prices on some 300 items, including confectionery products, milk and sugar, rose by 3 to 10 percent in September, according to the Hanoi Supermarket Association.

Phu said the prices of consumer goods will see stronger increases from now until Tet in January 2011 due to holiday demand. “Prices of hundreds of consumer products increase every day,” he said.

The devaluation of the Vietnamese dong will further drive the price of imported products higher, raising business input costs as well as consumer prices, she said.

This will only add to the inflationary pressures on the country’s economy.

In a recent report, the Asian Development Bank predicted that Vietnam’s inflation would reach 8.5 percent this year and 7.5 percent next year.

Saturday, February 5, 2011

Vietnam steps up drive to tamp down inflation

HANOI - Vietnam is redoubling its efforts to tamp down inflation in the final months of 2010 amid concerns that rising prices will add to the downward pressure on the dong and get uncomfortably high ahead of a big political meeting.

A Reuters poll published on Thursday showed economists in Vietnam and outside expect consumer prices to rise 8.5 percent this year, exceeding a government target of 8 percent. They also saw the dong weakening into next year.

With end-of-year inflation pressures set to build, Prime Minister Nguyen Tan Dung issued a directive this week for government ministries and provincial authorities to strengthen measures to stabilize prices in the fourth quarter.

The finance ministry, meanwhile, took another step last week towards much-criticized price controls by naming 150 companies, including several foreign firms, that will be required to register new prices.

Annual inflation in September jumped to 8.92 percent from 8.18 percent in August, stoking fears of a return to high inflation, even though economists mostly attributed it to one-off factors.

"Obviously the action of the prime minister and the ministry of finance is reflecting at least partially the huge concern and the reaction of the population to the very high consumer price index in September, and expectations that it will continue to rise in October," said former government adviser Le Dang Doanh.

Dragon Capital, a Vietnam fund management firm, said in a report this week September's figure was "a bit unsettling", prompting it to raise its full-year CPI forecast to 8.9 percent from 7.8 percent.

"Inflation needs to be handled because it is a key driver of currency weakness -- the other one being the trade deficit, which is probably flatlining now, but is still big," it said.

Limited effect

The dong has slipped some 2.3 percent on unofficial markets since Aug. 18 when the central bank devalued the currency for the third time since last November.

The currency has come under renewed pressure, in part due to the meteoric rise in world and domestic gold prices, but confidence in the dong is anyway chronically weak in Vietnam.

With third-quarter gross domestic product growth at a comfortable 7.16 percent from a year earlier, on target to meet the government's goal of 6.5 percent for 2010, economists say the authorities have shifted their focus to inflation.

But Jonathan Pincus, head of the Fulbright Economics Teaching Program in Ho Chi Minh City and a former U.N. economist, said the government was taking the wrong approach.

"Reducing the fiscal deficit and tightening monetary policy are necessary now to take pressure off the currency in the short term and reduce expectations of inflation," he said.

"Administrative measures will not achieve these goals, since the problem is not, as the government often assumes, high levels of profit. Rather, profits are squeezed because input and financing costs are rising for domestic firms, while the scope for price increases is limited by the availability of cheap imports."

Still, Doanh said the government's efforts were understandable.

"It's very sensitive," he said. "We are approaching the Lunar New Year and approaching the Party Congress. If on the brink of the Party Congress the consumer price index is accelerating, I think it's a big problem."

Tuesday, January 11, 2011

Lawmakers strike cautious note about high inflation

Lawmakers strike cautious note about high inflation Vietnam’s economic expansion must be accompanied by efforts to control public debt and inflation, legislators said.

According to a government report released at a meeting of the National Assembly’s Standing Committee on Saturday, most of the economic targets set for this year will be achieved, including an annual inflation rate of 8 percent and a 6.7 percent growth in gross domestic product.

The government also projected an economic expansion of 7-7.5 percent and 7 percent inflation for next year.

But Phung Quoc Hien, chairman of the NA’s Finance and Budget Committee, said keeping inflation at 7-8 percent a year should not be seen as a triumph.

“An economic growth of 6.7 percent would be more meaningful if inflation is controlled at a low level,” Hien said. “Other countries have inflation rates of 2-3 percent and they have already made efforts to control prices because they consider such rates too high.”

Vietnam has set its annual inflation target at 7-8 percent for several years and “this has to be reconsidered,” he said.

The Finance and Budget Committee said trade deficit and public debt expansions also posed problems to the economy.

Vietnam’s public debt is expected to reach 52.6 percent of the GDP this year and then expand to 57.1 percent in 2011, according to the government report.

Many legislators said they are concerned that these ratios pose grave threats to the safety of the economy.

Ha Van Hien, chairman of the Economy Committee, said the problem is that, while debt is expanding, it has not been used effectively.

Truong Thi Mai, chairwoman of the Social Affairs Committee, said she's worried about Vietnam's future: the national debt is huge and the country’s GDP growth has been forecast to slow down after 2020.

The government has set a budget deficit target at 5.5 percent of GDP for 2011, but the Finance and Budget Committee requested the target to be lowered to 5 percent only, or VND120 trillion.

Vietnam plans to raise minimum wage to from VND730,000 to VND830,000 a month in May of next year. The government estimated that VND27 trillion from its budget will be use to finance the plan.