According to Nguyen Duc Thang, a GSO official, the record high CPI was attributed to the increase in petrol prices on November 22, prompting food and services prices to go up. Due to difficulties in restoring livestock breeding in the post-bird flu period, farmers tended to speculate poultry for sales during the upcoming lunar New Year Festival (Tet), causing pork prices to increase sharply.

High food prices consequently drove the CPI in December up as foods make up 43 percent of total consumption, said Mr Thang.  

In addition, Mr Thang said the soaring price of petrol also sparked a rise in transport fees and the price of building material.

Delegates at the conference shared the view that although the Government and all sectors made every effort to rein in the galloping CPI, adopted measures have not brought about high efficiency. They forecast that the CPI in January 2008 would not surpass the figure from December 2007, given the fact that State employees’ minimum salaries will increase as of January and the purchasing power for Tet holidays remains high.

High inflation rate

Experts attending a workshop in Hanoi on December 25 also predicted that Vietnam’s inflation rate would be between 11-12 percent this year, higher than the figure in regional countries in recent years. They said that the country’s two-digit CPI in 2007, which was higher than the economic growth rate of 8.5 percent, prompted the inflation rate to rise significantly. They attributed the price hike to the soaring price of petrol and the high purchasing power during the Tet holidays.

Dr Le Quoc Ly, director of the Financing and Monetary Department under the Ministry of Planning and Investment, said that if comprehensive solutions are devised at the beginning of 2008, the inflation rate will be kept at a modest level.

Meanwhile, economic expert Kenichi Ohno from the Vietnam Development Forum (VDF) said that Vietnam is experiencing the highest inflation rate among emerging Southeast Asian countries. Every year, he said Vietnam receives a huge inflow of foreign investment, amounting to US$15 billion in 2007 and equivalent to 25 percent of GDP in 2006. With such an amount, all the macro signs of a capital crisis could be seen in the initial period, except an over-evaluation of the domestic currency (VND). Citing the impact of the 1997 Asian financial crisis, he urged policymakers to carefully draw lessons learnt from the crisis.

According to the expert, Vietnam and other developing countries are experiencing economic booms due to the strong inflows of foreign currencies plus strong investment and high inflation. Inflation in Vietnam should be viewed as a common international phenomenon rather than being a single example, said Mr Ohno.

The workshop was held by the Market and Price Research Institute under the Ministry of Finance.