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Vietnam suffers the dull “inflation ache”
Though the consumer price index (CPI) decreased in some of the last months, Vietnam has never escaped from the inflation ache.
The “inflation fire” has been smoldering over the last many months. Nguyen Thi Phuong Lam, an analyst of the Rong Viet Securities Company, noted that the petrol price increase in mid-July has had big impacts on the CPI.
According to Lam, the CPI in the first half of 2013 increased by 2.4 percent in comparison with the end of 2012, the lowest increase since 2009.
However, the low inflation prompted government agencies to speed up the price adjustment plan. The power, coal, petroleum and public service providers, reasoning the low inflation, have raised the selling prices.
“Therefore, we believe that some categories of basic and essential goods will increase in prices in the second half of the year, which would affect the CPI,” Lam said.
Despite the great efforts, the Vietnam’s economy did not obtain any significant growth in August. The trade deficit in August was estimated to reach $300 million, raising the accumulative trade deficit in the last 8 months to $577 million.
Meanwhile, the CPI in August increased sharply by 0.83 percent over July and 7.5 percent over the same period of the last year.
Though showing a lot of positive factors, the HSBC Global Research report has proven that Vietnam’s inflation has become higher.
The report has pointed out that fighting against inflation remains a big challenge for Vietnam. The prices of goods and services increased in August and would increase further in September, following the power, petroleum, education and healthcare service price increases.
Meanwhile, the moves of the State Bank may make the challenge bigger for Vietnam. The bank, which strives to obtain the 12 percent credit growth rate this year, has been trying to slash the interest rates in an effort to pump more capital into the national economy. The interest rate reductions will put a harder pressure on the inflation.
However, the problem is that the national economy is weak which cannot “absorb” the huge capital. Since businesses still cannot clear their stocks, they dare not to borrow capital to expand the production.
The high inflation would have negative impacts on the whole national economy, but consumers, who depend on the market prices, are the biggest sufferers.
The biggest worry for people now is that they have become “disorientated.” The investment channels which can bring profits have been narrowed since the national economy began falling into the decline in 2008.
The State Bank has many times lowered the ceiling deposit interest rates, which is believed to pave the way for banks to slash the lending interest rates to make it easier for businesses to access bank loans.
As a result, the deposit interest rates have decreased to 5-6 percent per annum, while the inflation rate is believed to reach 7 percent.
Meanwhile, buying gold is no more a reasonable investment channel for the majority of people. Despite the efforts by the State Bank, the domestic price still has been much higher than the world’s price.
In early September, the price gap was VND4 million per tael, or 12 percent.