The reverse in the consumer price index (CPI) came as no surprise as the prices of essential commodities, including petrol, gas and electricity, have increased recently.
In July, transport and housing costs fell by 2.71% and 0.93% respectively but rallied to rise 1.07% and 2.03% the following month, driven by oil and gas price increases.
The cost of drugs and medical services continued to go up by 5.44% in August after major hospitals implemented the new medical fee scheme. Last month, they increased 3.36%.
In addition, food and restaurant services, which make up a substantial proportion of the overall CPI, dropped slightly by 0.18% month on month, much lower than the 0.47% decline in July.
Many economists said that the drop in consumer prices in the past two month was only temporary since they were affected by items facing volatile prices such as food and energy.
Boosted by spikes in the prices of essential commodities, the CPI in August bounced back with the largest month-on-month rise in the last six months.
Analysts have forecast that the domestic prices of many commodities will continue to rise until the end of 2012 due to the upward trend of prices on the world market.
Growing consumer demand in the final months of the year will also cause the prices of many commodities and services to increase.
Bearing that in mind, the Government should continue its drastic measures as outlined in Resolution 11 to stabilise the economy, curb inflation and maintain steady growth.
Although consumer prices have gained just 2.86% and the year’s target for 7-8% inflation is likely to be met, inflation may spiral out of control in the coming years if appropriate measures are not implemented carefully.
In the past, credit growth has remained modest so monetary policies were not a threat to inflation.
However, the recent move by the State Bank of Vietnam to remove the cap on credit growth for several commercial banks has raised concerns about a large amount of money being injected into the economy.
The disbursement of funds from the State budget will also be accelerated in the final months of 2012.
Therefore, relevant authorities need to co-ordinate monetary and fiscal policies flexibly to ensure an increased money supply will not spur inflation in 2013 and the following years.
