Underlying inflation rate needs attention

Reasons leading to increasing CPI

June’s CPI increased by 0.46 percent compared to the previous month and 2.35 percent compared to the end of last year. In general, this figure in the first six months of the year expanded by 1.72 percent compared to a year ago. Some 10 among 11 major commodity groups recorded price increases with the highest growth rate belonging to transport services, followed by housing and building materials, while post and telecommunications saw a drop of 0.06 percent.

According to the General Statistics Office (GSO), government policies; market factors; and natural disasters and adverse weather played a role in increasing the CPI over the first half of this year. Regarding government policies, medical service prices increased by 23.12 percent following Joint Circular 37/2015/TTLT-BYT-BTC dated October 29, 2015 of the Ministry of Health and the Ministry of Finance that took effect on March 1, 2016, contributing to increasing the CPI in the first six months of the year by around 0.86 percent compared to a year ago. In addition, to implement a roadmap to increase tuition fees based on Governmental Decree 86/2015/ ND-CP, some provinces decided to increase education fees, nudging the CPI in the first half of the year up by around 0.22 percent compared to the same period last year. Moreover, the regional minimum wages applied to workers in enterprises increased since the beginning of the year, creating pressure on price increases.

Market factors also affected the CPI in the first half of the year. In addition, natural disasters and severe weather in early months led to price increases in food and food stuff.

Several factors helped curb the CPI in the first six months such as declined gasoline prices, while supplies of goods remained abundant thanks to good coordination between the Ministry of Industry and Trade and relevant agencies. There was also no significant price hikes during the Tet holidays. In addition, the State Bank of Vietnam operated interest rates and exchange rate flexibility in accordance with the macroeconomic situation, and domestic gold prices remained stable in line with fluctuations in the global prices.

The GSO’s Price Statistics Department Director Vu Thi Thu Thuy said that the CPI in the first half of the year recorded reasonable increase and this year’s figure would be controlled in a safe threshold.

CPI increase predicted

The CPI in the first six months of the year expanded by 1.72 percent compared to a year ago, recording an average of 0.39 percent each month. This was not the high growth rate compared to previous years. However many factors pushing the CPI up in the last months of the year are available such as increasing prices of health care services, education and fuel.

This year’s CPI is likely to be controlled at below five percent as set by the National Assembly. To achieve the goal, ministries and departments must adopt a suitable roadmap to avoid price increases at the same time.

Inflation as measured by CPI

The Ministry of Planning and Investment has proposed to the government to take an average CPI over the same period last year as a measurement of Vietnam’s inflation. Vietnam and other countries’ CPI are generally published under the original comparison. For example, the CPI in the first six months of this year expanded by 1.72 percent compared to a year ago.

To take the CPI as a measurement of inflation in the economy, countries often use the current year’s CPI compared to the previous year. This is considered the inflation rate as it reflects the full 12 months of the year compared to the previous year, while the figure in December of the current year compared to December last year only reflects the price fluctuations.

Nguyen Hoa