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Electricity price increases to push commodity prices up
Right after the news about the 8.92% electricity price increase was released, economists said that the price increase would definitely lead to commodity price increases in the time to come.
Chairman of the Hanoi Supermart Association Vu Vinh Phu said that the prices of all essential commodities from petrol and oil, gas, electricity, water, transport fee to food and milk, which have been staying at high levels, will become even higher in the time to come with the electricity price increases.
“It is very likely that the prices of commodities will increase before March 1, when the decision on the electricity price increase goes into effect,” Phu said.
The Hanoi Supermart Association is planning to check prices in some supermarts and markets in Hanoi to show relevant ministries and branches when it suggests measures to manage the domestic market.
Associate Prof. Dr. Ngo Tri Long from the Finance Institute said that the government and relevant ministries need to be aware of possible overall impacts of the price increases on the consumer price index (CPI) increase and the GDP growth rate decrease.
“I think that the conclusion by the Ministry of Industry and Trade…that the electricity price increase will not have big impacts on the entire national economy, is incorrect,” Long said.
The ministry estimated that the increase would slow the GDP growth rate by 0.05-0.07% and make the CPI increase by another 0.25-0.3%, while it would make production costs increase by 3-4%.
Long said that Vietnam still needs to ask an independent agency to forecast impacts of the price increases. He said that the price increases would nullify interest rate subsidy and demand stimulus policies being undertaken by the government.
Producers have also expressed concerns about the decision. Pham Chi Cuong, Chairman of the Vietnam Steel Association, said that steel mills now need 700 kwh to make one tonne of ingot steel.
Cuong said that the electricity price increase will make steel producers suffer, as the electricity price will make production costs higher, while producers cannot raise sale prices as supply far exceeds demand.
Director of Lam Thao Chemicals Company said that when the electricity price increases by 8.92%, fertiliser production costs will increase by some 10%, which spells that a fertiliser price increase is unavoidable.
As for Vietnamese people, the electricity price increase in the context of deflation, when a lot of families have to cut expenses, will put them in bigger difficulties.
VietNamNet, Lao dong
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