Forecasts differ on likely 2007 inflation rate

06/08/2010 - 59 Lượt xem

A seminar held in Ha Noi last week, by the Institute of Prices Analysis saw experts present differing opinions on how the country’s consumer price index will be affected for 2007.

Although inflation was kept to a 6.6 per cent increase in 2006 from the previous year, there will be external pressures at play that will fuel a rise in the CPI this year to between 7 - 7.5 per cent, said Ngo Tri Long, deputy director of the Institute of Prices Analysis, at the seminar entitled "Price market development 2006 and the CPI forecast for 2007".

The CPI in the first quarter of 2007 is expected to increase by 3 - 3.5 per cent, on the back of strong consumer spending running up to and during the Tet (Lunar New Year) holiday in the middle of February.

Nguyen Van Lich, director of the Trade Research Institute under the Ministry of Trade said that the world’s petrol and oil prices will continue to see increases for the foreseeable future.

Lich said that, oil prices will continue to hover over US$60 a barrel, fertilisers at about $250 per tonne and ingot steel will fetch around $420 per tonne.

The domestic energy market, will be affected by the planned reduction of government subsidies on electricity, coal, petrol and oil which will all increase inflationary pressures for 2007.

The Government has already approved an electricity price hike for the 2006-10 period, and the Viet Nam National Coal and Mineral Industries Group (Vinacomin) has suggested a 20 per cent increase in coal prices for its four largest industrial end users of electricity, cement, fertiliser and paper from January 2007.

However, some experts were of the opinion that the CPI this year will see an increase lower than that of 2006, and will hover at around 6 per cent for 2007.

Observers at the conference argued that with Viet Nam’s inclusion into the World Trade Organisation, imported goods duties will decrease, which would lead to a decline of imported goods prices.

"Foreign goods will penetrate into the domestic market with competitive pricings, and domestic enterprises will then be obliged to restructure their business operations. The quality of their products will increase while price will have to be decreased if they are to remain competitive," argued Dr Nguyen Thi Hien.

Last December consumer price index (CPI) rose 0.5 per cent over that of the previous month, pushing the indicator up for the year to 6.6 per cent, a figure that is lower than the initially predicted rate of 7 per cent, the General Statistics Office reported.

The index stabilised in 2006 after seeing inflation spike to over 8 per cent the previous two years. Foodstuffs had reported the highest increases of 14.1 per cent compared to the previous year.

The rises of 6.5 and 6.2 per cent in the electronics and home appliances sectors were the second and third largest increases recorded amongst surveyed groups.

While the post and telecommunications sector gave consumers some relief by posting an overall decrease of 2.9 per cent.

Observers said that to keep the CPI in check the Government should monitor the fluctuations in world oil prices, and then take the initiative in formulating a strategy in relation to goods prices and tax duty levels.

The total service and retail goods turnover for 2006 is estimated to reach VND580 trillion (US$36 billion), up 20.9 per cent over 2005. The National Assembly has set a target of keeping the CPI increase lower than the economic growth of 8.2 per cent, for the 2007 year.

Source: Vietnam News