A few days ago, Eric Sidgwick, Asian Development Bank (ADB) country director for Vietnam, announced that inflation in the country “will continue to average 3.5% this year, before edging up to 3.8% in 2020, as domestic demand is sustained and as a result of anticipated increases in some administrative prices and minimum wages.”
According to an ADB report on Vietnam’s economic prospects this year, the announcement that the US Federal Reserve will no longer raise its policy rate in 2019 is likely to relieve pressure on the Vietnam dong and inflation, and lower international oil prices.
Besides, upward adjustments to administered fees for public education, healthcare, and electricity may add to inflationary pressures, as may a higher minimum wage.
Spain-based FocusEconomics, which provides in-depth economic analysis globally, also reported that, in Vietnam, mounting domestic inflationary pressures, administered price hikes on utilities and the new petroleum tax will likely lift inflation moving forward.
“Our panelists project that inflation will average 3.4% in 2019, which is down 0.1 percentage points from last month’s forecast, and 3.9% in 2020,” said the firm’s fresh report on Vietnam’s economic outlook.
It is clear that both ADB and FocusEconomics remain upbeat about Vietnam’s inflation this year. The National Assembly has set an inflation rate of below 4% for this year.
In the first three months of 2019, increases in the prices of foodstuffs, educational services, and some other goods and services have served as the key drivers of the consumer price index (CPI) ascension.
The General Statistics Office (GSO) last week reported that Vietnam’s average CPI for the first three months increased 2.63% on-year, a bit lower than the 2.82% rise in the same period last year.
The biggest drivers of the CPI ascension are the strong on-year hike in the prices of foodstuffs (5.18%) and educational services (6.29%), followed by housing and construction material services (1.82%).
Tran My Lan, country director Belgium’s largest exporter of high-quality potato products, told Nhan Dan Online that it is understandable that the price of foodstuffs, one of the 11 groups of goods and services used by Vietnam to measure the CPI, has increased since early this year.
The group’s total revenue in the Vietnamese market in the first three months of this year rose by about 20-30% on-year.
“It is because the local demand is growing, especially during the traditional Tet festival in February. It is expected that our revenue will be higher in the year’s second quarter,” Lan said. “Demand for foreign potatoes in Vietnam is increasing strongly, in particular from enterprises, restaurants, and supermarkets. Our products are now sold by big supermarkets in Vietnam, such as Vinmart, Aeon, Mega Market, Big C, Co.opmart, and Fivimart.”
However, Lan noted that the price of potatoes has skyrocketed by 20-30% since last October because of supply shortages caused by crop losses in some European nations.
According to the GSO, since last September when Vietnamese pupils began their new school year, educational service prices have been on the rise due to the government’s Decree No.86/2015/ND-CP on collecting and managing school fees from 2015-2021, the price of educational services will increase 10% in 2019, generating a 0.5% rise in inflation this year.
Meanwhile, since early this year, the price of housing and construction material services have also increased, due to growing demand among the public, who repaired and built their houses and works, the GSO said.
Furthermore, the price of healthcare services has also climbed in the first quarter of 2019, at 1.11% on-year.
Under the Ministry of Health’s Circular No.39/2018/TT-BYT taking effect on January 15, 2018, the price of healthcare services in all hospitals will ascend in 2019. It is estimated that the price of the healthcare service group will grow 15%, creating a 0.6% rise in 2019’s inflation.
Tran My Lan expected that the prices in the local market may continue increasing.
“For example, our costs for transport and production have increased due to a rise in the market prices,” she said. “Moreover, so as to control inflation, the government delayed the application of a new plan on inflicting environmental taxes on petrol, and postponed the hike in power prices. However in 2019, when an increase in the prices of these items will not be able to be delayed any longer, there may be risks for a climb in inflation.”
