Vietnam’s inflation rate may exceed the 8pct threshold in 2013

Source: Vietnamnet

The consumer price index (CPI), after increasing by 0.83 percent in August, soared by another 1.06 percent in September. Analysts have warned the inflation rate in 2013 may go beyond 8 percent. Big challenges for government to curb inflationAs such, the CPI has increased by 4.63 percent so far in comparison with December 2012. Meanwhile, Vietnam strives to restrain the CPI increase at 7 percent by the end of the year.The sharp petroleum and electricity price increases recently have created the “fuse” which may trigger the price hike bomb. Manufacturers still dare not raise the selling prices because of the low demand. However, they will do that in the time to come, when the demand at end of the year increases.Analysts have also warned that the increases of the healthcare, education, culture service fees at the same time in September would cause a domino effect, pushing the prices of other goods and services up in the last months of the year.The latest report by HSBC also pointed out that a hard pressure has been put on the inflation, following the price increases in the healthcare, power and education service fees. Vietnam twice witnessed the high inflation rates in August, including the 23.8 percent increase in August 2008 and 23 percent in August 2011.This explains why the worry about the high inflation has been raised after the CPI increase escalated from 7.3 percent in July in comparison with the same period of the last year to 7.5 percent in August 2013.The expected huge capital pump into the national economy in the time to come will also be a reason that pushes the inflation rate up.Vietnam strives to obtain the credit growth rate of 12 percent in 2013, but the outstanding loans have increased by 6.8 percent so far, which means that the lending needs to increase by more than five percent in the next three months. This spells that about VND160 trillion would be pumped into the national economy in the three months, or VND50 trillion a month.Meanwhile, the disbursement of the capital for public investment projects has been sprinting. According to the state treasury, 143,450 billion out of the over VND200 trillion worth of capital for the projects has been disbursed so far. As such, about VND80 trillion would be disbursed in the last four months of the year.How high will the inflation rate in 2013 be?Economists repeatedly urge to pump more capital into the national economy to help businesses recover from difficulties, or the production will become standstill. However, they fear that if such a huge amount of money is put into circulation within a short time, this would cause the high inflation.The National Assembly’s Economics Committee has cited the macroeconomic prospect report as saying that the inflation rate would be 7.32 percent if there are no big changes in the policies and the heavy price fluctuations in the world market. In another scenario, the inflation rate may reach 8.84 percent in case of the essential goods’ price increases and the exchange rate policy changes.The Asian Development Bank (ADB) has forecast that the Vietnam’s inflation rate in 2013 would be over 7.5 percent.

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