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Vietnam Today

Headline inflation up in Q1

Released at: 15:44, 14/04/2016

Headline inflation up in Q1

Vietnam's headline inflation rate increased by 1.69 per cent in the first quarter of this year

Inflation rises on back of higher medical and education costs and rebounding global commodity and service prices.

Vietnam’s headline inflation rate was 1.69 per cent in the first quarter of this year, putting pressure on the new government to curb it, according to a quarterly report on macro-economic growth prepared by a group of researchers from the Vietnam Institute for Economic and Policy Research (VEPR).

Quarterly inflation was attributed to increasing fees for medical services and education and the recovery of commodity and service prices around the world.

New developments in the global economy, along with domestic changes, make inflation figures difficult to forecast, VEPR Director Nguyen Duc Thanh said.

The figure is predicted to increase by 4 to 5 per cent throughout the year, following surging prices for energy and food due to the ongoing drought in central highlands and Mekong Delta provinces. Medical service fees will increase again in July and so will education costs when the new school year begins in September.

According to Mr. Truong Dinh Tuyen, former Minister of Industry and Trade, pressure from inflation also comes from petrol prices, which are now on the rise.

The report also put GDP growth in the first quarter at 5.46 per cent, down from 6.12 per cent in the previous quarter. For the first time in five years economic growth is moving at a slower pace.

While service sector growth remained stable, the industry sector grew only 6.72 per cent growth compared to 8.74 to 9.64 per cent over the course of last year.

The report also revealed that the agriculture sector experienced a difficult time from January to March as rice productivity in the Mekong Delta region and crop yields in the north diminished.

“Economic figures in the first quarter are usually low,” Mr. Thanh said, adding that economic policies aimed at macro-economic stability in the long term should be encouraged instead of being aimed at overly high targets.

“What threatens the national economy the most is State overspending and rising public debt,” said senior economist Le Dang Doanh.

The private economic sector is showing weaknesses, he went on, as a number of enterprises have gone bankrupt. Recent free trade agreements (FTAs), however, will contribute to economic growth.

Mr. Tuyen suggested further economic restructuring to create the conditions for long-term growth and ensure sustainable development.

The report stated that despite the challenges the economy faces the research group expects conditions for economic growth to remain positive if Vietnam takes advantage of the opportunities from FTAs and if administrative reform is boosted.

Source: VNS

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