By Thuy Trieu - The Saigon Times Daily
HCMC – The country’s target of curbing 2010 inflation at 7% looks unrealistic as the final figure may be a double-digit one given the high consumer price index in major cities so far this year and soaring input costs for the economy, experts said.
All essential commodities are substantially more expensive this year, including electricity and gasoline, while the local currency dong has also depreciated this month following new forex policies of the central bank.
Gasoline price by February 21 increased VND590 per liter to around VND17,000 while an electricity price hike has been approved by the Prime Minister in principle to be effective from March 1. In addition, the foreign exchange rate between Vietnam dong and the U.S. dollar has just been scaled up 3.3%, right after the previous increase of 5.44% in November last year.
Those movements will soon be factored into goods prices in the coming months especially March. Meanwhile, indicators showed February consumer price index (CPI) rises 2.61% in Hanoi and 1.68% in HCMC, suggesting that the February CPI of the country would increase by around 2%. As the January CPI rose by 1.36%, CPI of the first two months of the year is expected to be higher than 3%.
Experts said CPI would be high in March, which will be a sensitive month setting the trend for the year.
Vu Dinh Anh, deputy director of the Institute for Market and Pricing under the Ministry of Finance, said as a general rule, CPI of January and February were usually high because of Tet Holiday when people boosted consumption. Meanwhile, March CPI would be the key point to decide the price trend in the whole year, and this rule has happened in previous years, he said.
“Normally, if March CPI is lower than 0.5%, the inflation rate of the whole year can be kept at the one-digit level. If March CPI is higher than 0.5%, the inflation rate will be at the two-digit level in that year,” Anh explained.
According to the expert, the increase in gasoline and electricity prices would drive up the March CPI, as these commodities would have adverse impacts on prices of other goods such as food.
Therefore, the expert recommended the Government take prudent steps in launching policies relating to prices of essential goods especially in March.
In addition, many experts forecast that the impact of the loosened monetary policy last year would produce negatives effects in April and May this year, which suggests that it would be very hard to keep 2010 inflation rate at a one-digit level as per the Government’s target, Anh said.
Echoing Anh’s opinion, economist Le Dang Doanh told the Daily that besides increases of water, electricity, and gasoline prices, and the changing forex rate, the basic salary would also increase in the near future.
“Such factors will sooner or later be reflected in goods prices. I do not agree with the Finance Ministry saying we can curb the inflation at 7% this year, I’m afraid it will be very hard to achieve the target,” Doanh said.
Furthermore, Doanh said, the rising oil price attributed to the global economic recovery would also be a negative external factor. The International Monetary Fund (IMF) has revised up its forecast on oil price from US$76 to US$78.32 a barrel this year and US$82.5 a barrel in 2011 instead of US$82 earlier, he said.
Tran Hoang Ngan, vice head of the HCMC Economics University, shared the view with the two experts, projecting the 2010 inflation rate at 10%-12%.
“To achieve the 7% target as endorsed by the National Assembly, we need years to carry out synchronized measures that require collaboration of ministries,” he said.
According to Ngan, the Government should take immediate measures to reduce the State budget deficit, improve the trade balance, and settle issues relating to the interest rate and the forex rate.