High CPI Increase Raises Concerns About Inflation In 2018

VietNamNet Bridge - The CPI soared by 0.55 percent in May as reported by the General Statistics Office (GSO), a six-year high. 

The CPI soared by 0.55 percent in May

Meanwhile, the government wants the inflation rate in 2018 to be below 4 percent.

Core inflation, i.e., CPI excluding food, energy and product items put under the state’s control in pricing such as some healthcare and education services, increased by 0.11 percent in May compared with the month before and 1.37 percent compared with May 2017.

Of 11 major categories of goods and services, nine categories saw prices increasing. Of these, transportation services saw the sharpest rise of 1.72 percent. 

Do Thi Ngoc from GSO attributed the sharp increase in CPI in May to the pork price rise and the petrol price increase of VND1,010 per litres after two adjustments.

Head of the Ministry of Finance’s Price Control Agency Nguyen Anh Tuan also said on June 1 that the major problems lie in the petrol and abnormal pork price increases. 

Tuan said the agency has reported to Deputy PM Vuong Dinh Hue about the scenarios for inflation rates of 3.72 percent, 3.92 percent and 4.2 percent.

“It is within reach to curb the inflation rate at below 4 percent this year. The worst scenario would occur only if there are serious influences from outside,” Tuan said.

To control inflation, balancing supply and demand must be the most important thing that needs to be done. The Ministry of Health said it is reconsidering hospital fees and it may cut tens of expense items.

In principle, the world’s oil price increase will have big impact on Vietnam’s CPI. In the worst case, the oil price would increase sharply by 30 percent. If so, Tuan said, Vietnam would use the stabilization fund and try not to raise the petroleum prices in the domestic market.

Emphasizing that the high CPI increase in May is a worry, Nguyen Tri Hieu, a renowned banking expert, said state agencies need to closely keep watch over market performance to put forward suitable policies, especially on money supply.

“There must be the harmonized implementation of fiscal and monetary policies to be sure that a reasonable amount of money is pumped into circulation,” he said.

Meanwhile, according to Le Danh Doanh, former head of the Central Institute of Economic Management (CIEM), the worries about the global economic uncertainties have pushed the oil price from $50 to $80 per barrel and it is predicted to climb to over $100 per barrel this year. 

Since Vietnam’s petroleum prices depend on the world’s oil prices, the petroleum price adjustments are unavoidable.

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