Inflation rate to breach 5 per cent limit

January 15, 2016 | 11:43
(0) user say
Vietnam’s inflation is expected to stay at a higher level this year due to a rise in salaries and prices of consumer goods.


Prices for 2016 will rise dramatically in public services such as healthcare and education
Photo: Le Toan

HSBC last week stated that with the base effects from stabilising oil prices and a likely pick-up in the cost of food, Vietnam’s inflation for 2016 would climb to 5.1 per cent year-on-year.

This would exceed the government’s target of keeping inflation below 5 per cent, far higher than last year’s 0.63 per cent inflation rate.

State Bank of Vietnam Governor Nguyen Van Binh also said that “it will be difficult to keep the inflation rate below 5 per cent for 2016 due to the rise in prices of many indispensable items.”

Officials at the General Statistics Office (GSO) have also highlighted the risk that inflation could exceed the target of below 5 per cent this year, on acccount of a climb in tuition fees and possible increases in the cost of healthcare services and electricity.

Specifically, according to Vietnam Social Insurance, hospital fees are expected to at least double compared to late 2015. For example, the maximum daily fee for an emergency bed at a high-quality hospital could climb from VND354,000 ($16.1) last November to VND680,000 ($31) in 2016.

At a lower-quality hospital, the maximum daily fee for an emergency bed is expected to rise from VND66,000 ($3) to VND165,000 ($7.5). The price for a check-up will likely go up two-fold or four-fold, depending on the hospital’s standards.

As of January 1, 2016, the average salary for employees at private firms has increased 12.4 per cent. From May 1, 2016, the average salary for employees of state-owned enterprises, agencies, and organisations will also rise 5 per cent. In Vietnam, a rise in salaries often drives the market prices up.

Additionally, Electricity of Vietnam last week expected that the average electricity price for 2016 would be VND1,651, up VND21.4 as compared to the average electricity price in 2015.

According to Do Thi Ngoc, head of the GSO’s Pricing Statistics Department, in 2016, if the price of electricity rose 10-15 per cent, it would push inflation up by another 0.25-0.4 per cent.

Tuition fees are also expected to go up in 2016. Last October, the government enacted Decree 86/2015/NĐ-CP on collecting and managing school fees, under which fees will increase in 2016. In line with this decree, Hanoi last week decided to raise tuition fees at all of its state-owned educational establishments, with an average rise of VND30,000-40,000 ($1.36-1.8) per pupil per month for the remainder of the 2015-2016 school year.

Early this month, the government asked the Ministry of Planning and Investment to work with relevant ministries and agencies to find solutions to keep inflation below 5 per cent for 2016.

However, in late December 2015, the National Commission for Financial Supervision forecast that Vietnam’s inflation for 2016 would hover at about 2-3 per cent due to the continued downtrend in the global cost of goods projected for this year, which would contribute to reducing the prices of local goods and production costs.

By By Khoi Nguyen

What the stars mean:

★ Poor ★ ★ Promising ★★★ Good ★★★★ Very good ★★★★★ Exceptional