Vietnam to keep inflation under control

July CPI grew 3.59 percent from December of last year

>> Keeping CPI below 4 pct this year a challenge: Economist

The General Statistics Office (GSO) reports that the July CPI grew 3.59 percent from December of last year and 3.14 percent from the previous year. The CPI increased by 2.54 percent in the first seven months, while core inflation increased by 1.44 percent.

Ten of the eleven major categories of consumer goods and services saw price increases; however, the transport category had a 2.85% decrease in costs as a result of falling domestic gasoline prices.

There were 19 price changes for petrol during that time, including six decreases. Domestic gasoline and oil prices increased by 49.75 percent.

The COVID-19 epidemic which has been kept under control, has increased demand for restaurant services and caused a 3.81 percent increase in eating-out prices year over year. Between January and July, the cost of milled rice increased 1.15 percent while the cost of home improvement supplies increased 7.84 percent.

Meanwhile, price drops in food (down 0.07%), educational services (down 3.42%), and postal and telecommunications services (down 0.42) were noted (0.5 percent ).

Core inflation increased 0.58 percent from month to month and 2.63 percent from year to year in July. It increased 1.44 percent during the course of the seven months compared to the same period in 2021, less than the CPI's expansion of 2.54 percent, demonstrating that food and fuel costs were primarily responsible for changes in consumer prices, according to the GSO.

However, Mr. Dinh Quang Hinh, an analyst at VNDirect, predicted that the inflation would rise in the second half of 22 for some reasons.

>> Vietnam's inflation to remain manageable

First, the price of food and other staples may increase in 2H22. Prices of pork, chicken, and vegetables have lately increased due to a resurgence in consumer demand and high input costs. On July 12, 2022, the price of pork in the North is specifically trading at VND63.000–70.000/kg, which is 5–10% more than the June average.

"In the upcoming quarters, pork prices will continue to rise as a result of (1) recovering domestic demand, (2) rising transportation costs, and (3) an increase in unofficial-quota trade. It should be emphasized that pork prices in China are 20–30% more than pork prices in Vietnam”, said Mr. Dinh Quang Hinh.

Second, growing fuel costs put pressure on logistics and transportation expenses. Due to the protracted Russia-Ukraine conflict, global fuel prices woud continue to be high and won't be able to decrease anytime soon. Businesses that transport goods and people will likely have to raise their freight charges in the near future to cover expenditures due to the high cost of gasoline.

Third, the cost of manufacturing consumer items at home is increased by high material prices. Manufacturing enterprises may increase sale prices to offset input costs in 2H22 as a result of improved consumer demand, which was not possible in the prior quarter due to weak demand.

Mr. Dinh Quang Hinh anticipates that inflation will pick up in the coming month and that it will average 4.5 percent yoy in 2H22F (vs. 2.4 percent yoy in 1H22). He was still confident that the government will be able to keep inflation under control and achieve its goal of keeping the average CPI for 2022 below 4.0 percent yoy. Because the government has adopted practical measures to reduce inflation this year, such as lowering the environmental tax on fuel to lower domestic gasoline prices and altering the costs of public services like tuition. Additionally, in order to keep inflation under control, the government has created a plan to significantly cut tax rates on petroleum goods.

“We maintain our forecast for Vietnam’s average CPI in 2022 at 3.5% yoy”, forecasted Mr. Dinh Quang Hinh.