How to curb inflation?

Hopes of inflation control sprang up since consumer prices tended to ease in June; however, these hopes revolved to concerns as prices showed signs of rising in July.

Hopes of inflation control sprang up since consumer prices tended to ease in June; however, these hopes revolved to concerns as prices showed signs of rising in July. The rapid surge in food prices is causing more difficulties to wage earners. Therefore, the Government has adopted measures to deal with the new development.

High pressures of price hike

Food prices in the northern market rapidly escalated in early July partially because of rising exports and storm-affected supply shrinkage.

The strong surge in food prices, particularly pork prices, shocked the market. Although prices gained, farmers are still unwilling to boost production on fears of disease outbreaks. In the first six months of 2011, Vietnam raised 26.3 million pigs, down 3.71 percent year on year, and more than 8.5 million buffaloes and cows, down 4.6 percent. Feed prices also jumped high, with chicken feed price rising 14 percent from late 2010 to VND9,980 per kilo and pig feed price leaping 16.8 percent to VND8,797 per kilo.

Besides, the hike in food prices is partially attributed to huge purchase from Chinese traders, leading to supply shortages on the domestic market. In northern border provinces, Chinese traders actively purchase farm produce in Vietnam because food prices in China also are very high on the back of growing inflation. This caused the supply of some commodities to fall short and prices to go up strongly.

This price fever has fuelled up concerns that CPI will regain growth momentum in July. In reality, consumer prices only incremented month on month in the past 27 months. CPI growth in the first six months of 2011 already approximated 21 percent. Fears of price hike are not only originated from food prices. The stability of inflation is being tested as authorities at both central and local levels start to ask for funds to resume delayed projects after being put off by public investment reduction policy; interest rates are very high, liquidity of the banking increases, and the Ministry of Construction has proposed measures to rescue the real estate market, etc.

Mr. Do Thuc, General Director of the General Statistics Office (GSO), said at a press conference that CPI hike is resulted from rising costs, or it comes from production stage; hence, it cannot be reduced in a short time. Remarking on higher food prices, Mr Hoang Kim Giao, Director of Animal Husbandry Department under the Ministry of Agriculture and Rural Development, said that expanding domestic husbandry to boost up the supply to stabilise the market is the best way. It will need time and supporting measures to curb inflation; so, it is unlikely to hold back CPI growth in July which is estimated at 1.5 – 2 percent.

Government is determined to bring down inflation

Anticipating the likely CPI uptrend and threats from the food price hike in July, the Prime Minister has urged central and local authorities to keep inflation in check. Accordingly, the Ministry of Finance was assigned closely monitor price movements on domestic and international markets to promptly adopt appropriate tax policies and regulatory measures to stabilise the market, prevent price hikes of goods essential to living and manufacturing activities. The Ministry of Industry and Trade will coordinate with the Ministry of Agriculture and Rural Development, the Ministry of Health and the Ministry of Construction to seek out measures to expand production, regulate import and export, and ensure the balanced supply and demand of essential commodities such as foods, foodstuffs, fuels, fertilisers, steel and medicines to put an end to undersupply and price fever which will hurt production and living activities.

Localities should create favourable conditions for businesses, organisations and individuals to scale up production and trading of essential commodities, especially foods and foodstuffs.

Besides, speculative behaviours should be nipped in the bud in order to freeze unreasonable price hike and strictly keep the lid on compliance to pricing regulations.
The Ministry of Agriculture and Rural Development was assigned to work with the Ministry of Industry and Trade and People’s Committees of border-sharing provinces to tighten control over exports to ensure the sufficient supply in the domestic market and materials for export production.

As regards important commodities like electricity, petroleum and coal, the Government advocates market-based operation. State-owned corporations are urged to search for solutions and measures to trim down expenses. As per goods on the list of price stabilisation, producers and traders must build proper price-rising roadmaps.

CPI rose 1.09 percent in June, the lowest monthly growth this year, but it climbed up to 13.29 percent in the first six months. The Government said current price rates and interest rates remain very high, becoming the biggest challenge for the economy. Vice Chairman of the National Financial Oversight Committee Le Xuan Nghia recently warned that CPI is easing but if the monetary policy is loosened, it will erase all the efforts we have made and inflation will flare up.

Tags: Vietnam 2011 inflation, Vietnam economic, Vietnam economy, Vietnam inflation