VINACHEM

The consumer price index has been increasing for the last five months.

Following a 1.89 per cent year-on-year rise in April, it rose by 2.28 per cent in May, the highest rate since November 2014.
Prices of most goods and services in the basket making up the index have been rising.

Food was up by 2.36 per cent, beverages and tobacco by 2.37 per cent, garments by 2.31 per cent, housing and construction by 1.67 per cent, medicines by 26.8 per cent, education by 4.55 per cent, culture and entertainment by 1.57 per cent, and other goods and services by 2.23 per cent.

Only transport (9.76 percent) and post and telecom (0.58 percent) prices declined.

The inflation rate is likely to be sharply up in the remaining seven months of the year.

It averaged 6.73 percent in the two decades from 1996 to 2016, reaching an all-time high of 28.24 percent in August 2008 and a low of -2.60 percent in July 2000.

Analysts listed the most likely causes of inflation: The cost of healthcare is set to be adjusted upward in July; global fuel prices are creeping up again and are likely to have a knock-on effect on the prices of many other items, including consumer goods.

The global fuel price has increased by 60 per cent in the last two months to US$50 per barrel and is expected to keep rising.

A food shortage due to the prolonged drought and pollution could create pressure on the prices of food and beverages.

The high budget deficit is another contributing factor. According to the Ministry of Planning and Investment, in the first five months of the year the budget deficit reached VNĐ66.4 trillion (US$2.95 billion) and the figure is estimated to top VNĐ254 trillion by year-end.

The strong credit growth is another major inflationary factor.

Credit has grown by 5.48 per cent this year, the highest in the last few years, according to the State Bank of Viet Nam’s Credit Department.
Year-on-year the growth has been 17.59 per cent.

The trend is expected to continue especially after the central bank issues Circulars No.6 and No.7 that are likely to loosen monetary policy.