The price of essential goods and transportation remain expensive, despite the price of gasoline being cut on four different occasions. The Ministry of Finance (MoF) has said that the large number of interwoven factors and certain items long having higher input material costs means it is not possible to cut prices immediately and some delay will be experienced.
According to the General Statistics Office, the CPI in July increased 0.4 per cent compared to June while core inflation increased 0.58 per cent. The CPI increased 2.54 per cent year-on-year in the first seven months. Reasons behind the rising CPI so far this year include higher prices for essential consumer goods and gasoline.
In the tax structure for calculating gasoline prices, the Ministry of Finance (MoF) has proposed reducing rates on four types of taxes, including most favored nation (MFN), environmental protection, excise, and VAT. Although the reductions to excise taxes and VAT have not been announced, these are expected to stop the record increase in gasoline prices.
The CPI increased 0.69 per cent in June over May and 3.37 per cent year-on-year. Continuous increases in gasoline prices and the resulting rise in the price of essential goods and services were the main reasons behind the increase.
Commodity prices have continually increased in the first quarter of the year. Normally, after the Tet holiday early in the year, purchasing power is weak and businesses cut prices to stimulate demand, but this year prices are increasing due to rising gasoline prices. Businesses are trying to reduce profits and intermediary stages to stabilize sale prices.
Gasoline prices have increased six times over the past two months and are expected to hit a record VND30,000 ($1.3) per liter. This not only has a negative impact on inflation but also affects production and business activities and erodes people’s incomes. Analysts have said that if the world oil price rises to 150 USD a barrel and if the domestic gasoline price does not stabilize, then inflation will certainly increase to 4.5-5 per cent.
