Electricity and petrol price hikes pushing inflation up

13:24 | 11/05/2019 Economy- Society

The latest petrol and power price hike have directly impacted April’s consumer price index, the General Statistics Office (GSO) says.

A worker repairs electricity cables in Ho Chi Minh City - Photo by VnExpress

According to latest statistics released by GSO, Vietnam’s CPI in April increased by 0.31 percent over the previous month, while average CPI in the first 4 months increased by 2.71 percent compared to the same period in 2018.

"The increase in petrol and electricity prices have had a direct impact on increasing the consumer price index in the month," a GSO report said

Specifically, this contributed to an overall increase of 0.41 percent in the CPI. Out of the 9 group of goods that saw increased prices in the CPI basket, transportation costs rose the most, by 4.29 percent.

Professor Pham The Anh, an economist and co-founder of the Vietnam Institute for Economic and Policy Research (VEPR), said that the inflation rate will continue to rise in the coming months.

"The decision to raise environmental protection taxes on petrol, rising world oil prices and the recent increase in electricity prices by 8.36 percent all occurred in the first three months. These adjustments often do not immediately affect the inflation rate within the quarter, but may even last up to one year, with the strongest impact kicking in by the third or fourth month," Anh said.

Since the beginning of the year, gasoline prices have increased by nearly VND5,000 (21 cents) per litre for both E5RON92 and RON95 gasoline, the two types mostly used in Vietnam. This represented a rise of around 30 percent for both types of gasoline, which now cost VND20,688 (89 cents) per liter for E5RON92, and VND22,191 (95 cents) per litre for RON95.

Nguyen Van Quyen, chairman of the Vietnam Automobile Transport Association (VATA), said the sharp increase in gasoline prices will affect transport enterprises, because the fuel accounts for on average 35-40 percent of transportation costs.

"Nobody wants petrol prices to go up, but local prices are dependent on global prices. Enterprises do not react immediately to fluctuations, but if prices are forecast to remain high over 3-6 months, they are likely to respond," he said, speaking to local press.

Electricity prices also rose 8.36 percent in March as a result of rising production costs and higher coal imports. This was the first increase in two years.

However, many households were hit hard as electricity use doubled in April as a result of unusually hot weather. Many families turned on their air conditioners for long periods, causing electricity bills to soar, according to Nguyen Duy Quoc Viet, deputy general director of state-owned Vietnam Electricity HCMC.

According to VEPR, these price increases will also put serious pressure on costs in the manufacturing sector.

"Achieving the State Bank’s (SBV) 4-percent inflation target for the year will not be an easy task. To monitor inflation risks, the SBV needs to be careful with managing the money supply and credit growth in the coming time," it said.

Theo Vnexpress