Vietnam inflation may touch peak by late Q3

Vietnam’s inflation may continue to rise until August or September 2011, Nguyen Duc Thang Head of the Trade, Service and Price Statistics Department under the General Statistics Office (GSO).

Talking to VnEconomy regarding the information that although money supply is reduced, inflation is still influenced by gold and dollars, which are also means of payment, the large amount of foreign currencies and gold traded in the market still exists in the market even money supply was reduced, Thang said that the information is partially right. Currently, in addition to the causes of demand-pull and cost-push inflation, there is still a cause of psychology.

Concerning the meaning of a series of new price indices such as producer’s price index of industrial products and producer’s price index of agriculture products, etc., recently published by GSO, Thang said that all these indices are higher than consumer price index (CPI), calculated on a quarterly basis over the same period. Particularly, the producer’s price index of agriculture products increased by over 23 percent, while that of industrial products increaed by nearly 15 percent (in the first quarter of 2011, compared to the same quarter of last year).

As normal, production costs will increase or decrease first, then the consumer price index. When production costs are higher than consumer prices, according to experience, consumer prices would rise further.

Since Resolution 11 has just been implemented, it takes time to be effective, thus the situation would probably not be cooled down in the second quarter yet.

Price index of transport charges in the first quarter rose by nearly 11.5 percent compared to the same period of last year, while CPI of transportation group just increased by about 5.7 percent. Talking about how this difference would influence CPI in the near future, Thang said that it would continue to influence CPI, in the situation when fuel price is rising and price index of transport charges is higher than CPI of transportation group as at present.

Thang said that the announcement on the new price indices have been considered by the General Statistics Office since 1995.

At present, GSO is trying to bring them into life, and it would improve and upgrade them while using.

In addition to considering effects from cost-pull factors, sharing about whether GSO has calculated the impact of demand-pull inflation, Thang said that GSO and the State Bank of Vietnam (SBV) have calculated the basic inflation in line with international practices.

Basic inflation is actually the indicator in which factors such as variation, random shocks, sudden issues (such as people spend more in the Lunar New Year), or natural disasters have been eliminated while calculating. The method used is corresponding to the method GSO uses to calculate CPI, but small groups of details were used, including random shocks, to see whether monetary policy is having problem or not.

Concerning the forecast of the domestic market management team that CPI in April would be about 1.6 to 1.8 percent compared to March, Thang said CPI in April would still be high and could not go down immediately. At the time of the meeting with domestic market management team, fuel price has not been increased but CPI is already high if only counting food prices.

According to Thang, CPI in the second quarter would remain high, though not as high as February or March. It is already high if it is 1.4 to 1.5 percent. Usually, when monetary policy is adjusted, it takes six months to be effective. Therefore, inflation might begin to fall from August or September. – Vietbiz24

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