Price of goods escalating following dong depreciation

Manufacturers and suppliers have decided to raise sale prices for goods after the State Bank of Vietnam announced a 2.1 percent adjustment in the dong/dollar exchange rate on August 18.

Supermarkets warn of price increases

Vu Vinh Phu, Chair of the Hanoi Supermarket Association, said some supermarkets in the north are planning to raise sales prices by 2-8 percent after National Day, September 2. Food, confectionary products, vegetable oil, and household products will see the highest price increases.

Price increases of sometimes nearly 70 percent in northern supermarkets are because manufacturers in the south provide many of the goods. Companies have suffered from the dong depreciation and higher transport costs.

According to Phu, many food products have seen sharp price increases over the last three years. Previously, a bottle of wine was priced at 70,000 dong, while the price has soared to 150,000 dong. The price of beef has risen from 40,000 dong to 80,000 dong per kilo.

“The price of goods increasing due to the dong depreciation has been unavoidable,” Phu said. “In order to manage prices well, state management agencies need to help step up production and build up more effective distribution systems.”

Nguyen Van Tan, Director of Thong Tan Trade and Food Processing Company, said the dong/dollar exchange rate adjustment has had a large impact on business operations. He thinks that the additional expense businesses incur due to the exchange rate adjustment could be as high as 20 percent.

Nguyen Van Dong, Deputy Director of the Hanoi Industry and Trade Department, has confirmed that many food products in Hanoi have seen price increases over the last two weeks.

Price of imports to increase sharply

Analysts believe that the products that will fluctuate the most from the exchange rate adjustment are electronics, telecommunication equipment, and cars, which are described as the “most sensitive goods.”

Chair of Kylin – GX668 Trade Company Nguyen The Hung has affirmed that the exchange rate adjustment has negatively affected car dealerships.

“Taxes have increased and the dollar price has increased, while the demand has decreased,” Hung said. “A car previously was priced at 600 million dong, but now customers have to pay 30 million dong more for the car because of the dong depreciation,” he explained.

A large company headquartered in HCM City said that since the dollar price has increased, the company has had to raise the price of electronics and laptops by 500,000 –1 million dong.

The supplier said the price increase is inevitable, because all companies have to pay dollars when they import products. “Other products, like refrigerators and LCD TVs, have also seen price increases of 3-4 percent,” he said.

Nguyen Tuan Khai, General Director of IDP, a dairy producer, also said that the exchange rate adjustment has had a negative impact on import companies and companies that make products for domestic consumption.

According to Khai, the dollar price increase has caused the price of a yogurt-pouring machine imported from Italy, which had an initial price of two million dollars, to increase by $42,000. The higher price of the dollar has also increased the price of packaging paper.

“It is expected that total production costs will increase by 30 percent,” Khai said. – Tienphong

Tags: Vietnam dong devaluation