AsemconnectVietnam - The Consumer Price Index (CPI) in September 2016 increased by 3.14 percent compared to December 2015. However, deputy director of Price Statistics Department for the general Statistical Office (GSO) Do Thi Ngoc has confirmed that the CPI will only rise by five percent in 2016 and 2017.

According to Ngoc, since CPI in June 2016 increased by 2.35 percent against December 2015 and there have been adverse factors, especially the unfavourable situation of agricultural and fishery production and the marine pollution at four Central provinces of Vietnam, etc., the government’s socio-economic report submitted to the National Assembly mentioned that the inflation faced the risk of rising (despite being controlled in the first half of the year). This statement was made based on different reasons, such as the possibility that input factor and aggregate demand would put pressure on prices in the coming period and the inflation, hence, may exceed the five percent target.

Ngoc acknowledged that there are some pressures on CPI in the fourth quarter of 2016. Firstly, the roadmap to increase prices of medical services is still ongoing. Secondly, the gasoline prices have been following an upward trend since the beginning of the second quarter. Thirdly, the Lunar New Year holiday this year is fairly close to December 2016. Although in the recent years, people have tended to do less massive shopping and storage of commodities before and during the Lunar New Year holiday, the demand for essential goods before and during the Lunar New Year holiday is still significantly higher than other months of the year. Thus, it may create the pressure on CPI growth.

Lastly, the Gross Domestic Product (GDP) in the first nine months of the year, despite still growing higher quarter on quarter, has not met the target and is lower than the same period of 2015. Nevertheless, the government is determined to pursue the goal to achieve 6.7 percent GDP growth in 2016. To complete this goal, ministries, industries, localities and enterprises must focus on investment, which will lead to the rise of demand for investment thereby increasing pressure on CPI.

However, Ngoc believed that CPI this year will still be controlled at a maximum of five percent. According to Ngoc, the low CPI growth is due to both objective and subjective factors. The objective factors include the fairly stable prices of essential commodities in the world and the strong decline of some input commodities of the economy such as fuels and steel, etc.

Subjective factors include the active inflation control by ministries, industries and localities, and the active adjustment on prices of the goods and services managed by the State, especially the prices of medical and educational services.

Specifically, although the Joint Circular 37/2015/TTLT-BYT-BTC on prices of medical and treatment services regulated that the medical service prices should be raised in four phases, from the beginning of the year until now, only 16 provinces and cities having more than 85 percent of people enrolled in health insurance have adjusted the prices of medical services. In addition, some localities, despite having schedules to increase medical prices in September, have temporarily postponed their plans, for the reason that September is the starting month of the new school year, in which the consumption demand of the society would rise and the tuition fees would be increased under Decree 86/2015/ND-CP. If the prices of both educational and medical services are raised at the same time, the pressure on CPI will be very high.

According to Ngoc, the CPI growth target included in the 2017 socio-economic development plan of the government to be submitted to the National Assembly on the opening day of the 2nd Session to be held on October 20th is expected at about five percent, although there will be many factors putting pressure on CPI in both up and down directions. Ngoc believed that the five percent CPI growth target is in line with reality and in consistent with a developing economy, and will contribute to promote production and business, and GDP growth.

Regarding the opinions of some economic experts to not intervene in the CPI and core inflation and let CPI truly reflect the market, Ngoc said that the energy commodity has recently closely followed the market prices, while prices of medical and educational services do not reflect the market prices because these two sectors were subsidised by the state in the past. However, from 2011 onwards, the prices of these two essential services have been gradually increased according to schedule and will catch up the market prices by 2020. Ngoc added that medical and educational centres are allowed to calculate the cost of services plus a reasonable profit but they must comply with the roadmap, otherwise the massive increase in prices would affect people’s lives and strongly impact CPI.

The core inflation (excluding the volatility of prices of foods, energy and goods and services managed by the State) in the first nine months of 2016 rose by 1.81 percent compared to the same period of 2015. The core inflation has been stably ranging from 1.65 percent to 1.85 percent from the beginning of the year, with insignificant difference to CPI.

Source: Intellasia.net