Vietnam's 2005 inflation may hit 9.0 pct-report
HANOI - Vietnam will face inflation of 9 percent this year as people spend more in the last quarter and more state funds are injected into the economy, state media quoted a financial expert on Thursday as saying.
But Ngo Tri Long, deputy head of the Finance Ministry-run Market and Pricing Institute, said high consumer price index (CPI) growth was not a threat to an economy which performed well last year when prices rose 9.5 percent.
"Unless a large negative change occurs during the last months, the CPI growth will reach 9 percent by the end of the year," Long told the English-language Vietnam News newspaper daily in an interview.
"The economy will be negatively affected only if the CPI continues to grow at a fast pace for several consecutive years," he said.
"The problem is that the population's purchasing power often surges in the last quarter of the year and enterprises will be trying to fulfil the yearly business plans," he said.
Many people get year-end bonuses and spend more towards the end of the year on preparations for the new year festival.
"Additionally, the government is likely to inject more capital into the economy to ensure the gross domestic product grows by 8.5 percent this year," Long said.
Inflation will also be affected by a 20.7 percent rise in the minimum monthly salary for state employees to 350,000 dong ($22) from October 1.
The government aimed to keep inflation below 6.5 percent this year while it set the GDP growth target at 8.5 percent.
Economists agree Vietnam will miss its CPI target and a central bank official has forecast annual inflation at between 7.5 and 8.0 percent.
Last year, Vietnam's economy expanded 7.69 percent and inflation hit 9.5 percent, partly because bird flu reduced food supplies. Prices firmed 4 percent in 2002 and the rise slowed to 3 percent in 2003.
The International Monetary Fund has forecast Vietnam's inflation at 7.5 percent for this year.
On Wednesday, the government said the CPI had risen 7.8 percent in the year through this month and also 6.8 percent up from December, well above the government's initial target, which economists attributed to steep gains in world oil prices.
Vietnam has to export all of its crude and imports oil products as it has no major oil refineries. ($1=15,835 dong)
Reuters - September 22, 2005.
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