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Slower economic growth will keep CPI below 25 percent
Based on the rates from July, August and September, the Consumer Price Index (CPI) would be expected to increase by 1 percent per month in the remaining months of this year. At an economic growth rate of 6 percent, this would mean that the CPI could stay at 25 percent by the end of this year.
However, during a talk with VOV News reporter, Vu Dinh Anh, deputy head of the Institute for Market and Price Research under the Ministry of Finance predicted that in September, many favourable external and internal conditions could help reduce the CPI. According to his analysis of the development of the CPI in Vietnam and in the world market, the CPI should begin to decrease in the coming months.
Many favourable factors
Mr Anh said that price hikes in food commodities will not occur at this time of the year. After the recent intervention by the government which used VND15,000 billion to stabilize the price of rice in the Mekong River Delta region, the CPI for this sector is likely to go down.
The price of construction materials has already decreased after a sharp rise in the previous months. Although the purchasing power has picked up a little there has been a net decrease in the price of some consumer goods.
However, educational and entertainment groups showed signs of escalating prices due to changes in curriculum and the adoption of new textbooks in the new academic year.
In the international market, the price of petrol and oil has gone down continuously to as low as US$90 per barrel. This is a good chance to help boost production activities in the country.
The gradual appreciation of the US dollar has created good conditions for Vietnam to stabilise exchange rates. The country has recently seen a large influx of dollars which have helped stabilize the import-export balance.
Although the local stock market did not completely recovered in September, it is strong enough to attract many investors back. Thanks to that, money has poured into the market, helping stablise the price of consumer goods in the country.
Mr Anh said that although the real estate market is considered “frozen” and prices remains high, a few transactions have been carried out over the past months. If prices continue to decrease, transactions will recover and a channel to attract money to this market will be created.
Vu Dinh Anh said that food and foodstuff prices will rise, especially in the two remaining months of this year and during the traditional Lunar New Year (Tet). Meanwhile the price of construction materials may increase slightly because it is the end of the construction season and disbursement of State invested projects has accelerated.
“The Government has implemented saving and thrift policies recently and there will be a large amount of money in circulation as end of the year disbursement of State funds is gaining momentum, “ Mr Anh predicted.
Another important factor is that with the inflation rate for September at 0.18 percent and low inflation in August and July the State Bank of Vietnam will reduce the basic interest rate of the Vietnamese Dong, pushing deposit and lending interest rates down. This move will help raise the volume of credit and money in circulation as well as commodity prices in the three remaining months.
Currently, many economies count on the US economy, however the inflow of capital from US investors into Vietnam is not so much that they would need to withdraw to overcome a crisis at home. But if the US economy falters it will affect Vietnam’s exports as the US is one of Vietnam’s biggest trading partners. If the US does not import Vietnamese goods Vietnam must limit its own import of goods if not trade deficit will go up sharply.
Finally, a 15 percent rise in salary for pensioners has put more money into circulation without sending consumer prices soaring.
Mr Anh said that all of these positive indicators taken together with a projected rate of 6 percent the CPI will increase by 1 percent monthly and by 25 percent for the whole year. If the country accepts a growth rate of 7 percent, and pours even more money into investment the inflation rate could reach nearly 30 percent.
VOV
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