With the recent price hike of petroleum products, plus a rise in cooking gas and electricity last month, a new increase in price level will likely occur soon.
Many local people are expecting this, as the price hike of petroleum products on August 1 resulted in a slight increase in price level, Tien Phong newspaper reported.
Fear of rising prices
Thu Xuan, a resident in Hanoi’s Tay Ho District, told Tien Phong that the retail prices of many kinds of food and vegetables have risen within the first half of August, ranging from 5 to 25 percent.
Only rice saw prices remain stable, she said.
Generally, food prices rose slightly after the August 1 hike of petroleum products, but they will rise more sharply this time, she told Tien Phong.
Retail sellers in Xuan La Market in Tay Ho District said the pork price has surged an average of VND10,000 to VND100,000 a kilogram.
But as there are very few customers who can buy up to 1 kilogram each time, a possible price increase will make them limit their purchase at 300-500 grams or less.
Since the gasoline price increase will cause transport costs to go up, pork will become more expensive, said Bich Nguyet, a pork seller at the market.
“I may see a more unexciting trading atmosphere, and my daily sale volume may drop from two processed pigs to only half a processed pig a day.”
The situation in supermarkets like Fivimar and Coopmart have seen purchasing power drop 10-20 percent from last year, though there was no price adjustment after August 1.
Vu Thi Hau, deputy director of Fivimar, said: “Since the beginning of the year we have not received any information about price adjustment from the suppliers, so the prices have remained stable.”
“But the recent spikes in gasoline prices may leave a direct impact on input costs. So, if the suppliers increase prices, we will have to follow, though it will make purchasing power decline.”
Do Vinh Phu, chair of the Hanoi Supermarket Association, said gasoline is a very essential commodity – the main input – for many industries. So, under the combined effects of many factors and the domino effect, a new wave of price increases will come.
Consequently, everyone will cut spending. This contrast with the efforts of the government in trying to clear unsold inventories and stimulate consumption.
Current inventories of many businesses are rising, so the increase in gasoline prices will negatively affect the economy, which is at risk of deflation.
According to the general Statistical Office of Vietnam, as of July 2012, the industrial inventory index rose over 21 percent over the same period last year, though the total retail sales and services index went up 18.7 percent year-on-year.
Dr Nguyen Minh Phong, of the Hanoi Institute for Social and Economic Development Studies, said: “Every time the gasoline price increases, there will be the emergence of a new cycle of price increases.”
“This time, if there is such a spiral, it would be very dangerous for the economy, because production is increasing very slowly.”
“This will cause an imbalance in the goods supply – demand mechanism, making it increasingly difficult for businesses and people. It will hamper the implementation of measures to rescue the local economy by the government.”
Fear of inflation return
“If high inflation returns again in 2013, the belief in macroeconomic management will decline and the operation of the economy will be extremely difficult,” Dr Tran Hoang Ngan told newswire Vneconomy.
“Vietnam’s consumer price index (CPI) increased slightly in the first five months this year, and started to decrease slightly over the past two months. This can be considered as a good sign, and we should worry that CPI could drop even lower.”
“My analysis shows that the decrease is partly due to external agents, such as the continuous drop in oil prices and the prices of other goods. But they may increase again at any time when world prices rise.”
“Currently, the resilience of the European economy is still a mystery. If the European economy bounces back, world prices will likely rise again, and at a very high level.”
“But locally, electricity, water, and coal prices have increased and will tend to continue to do so. These factors will support a rise in inflation in the future.
In particular food prices, one of the major groups of goods in the CPI structure, still increased over the same period last year. Foodstuff and catering services rose by 1.95 percent and 11.73 percent year-on-year.
“My expectation is that they will continue to increase as livestock production does not meet demand. Many local farmers have abandoned their business for losses, due to the exhaustion of purchasing power and the rising cost of farming, let alone high interest rates.”
“Since early last year, we have upheld the objective to control inflation and stabilise the macro-economy, but in August CPI rose more than 23 percent over the same period in 2010.”
“I think it’s a memorable lesson that macroeconomic policymakers should have a long-term perspective in their job. If high inflation returns next year, it will become harder to curb it than in 2011-2012.”