Thursday June 05, 2008

Vietnam CPI inflation rate accelerates to 25.2% - fastest since 1992

bloomberg.com :

Vietnamese inflation accelerated to 25.2% in May [2008], the fastest since 1992, driven by record rice and energy prices, according to a statement released by the General Statistics Office in Hanoi today [27 May 2008]. Food costs have been the primary culprit for faster inflation, underpinned by surging international prices of rice, of which Vietnam was the third-biggest exporter and fifth-biggest consumer last year [2007]. Prices in the food category including rice jumped 67.8% in May from a year earlier.

To combat inflation Vietnamese authorities have told banks to cut lending, put in place some price controls and instructed government agencies to halt non-essential construction projects. Last week the central bank raised its key interest rate to 12% from 8.75% and allowed banks to offer lending rates of up to 18%. Vietnam's Ministry of Finance has proposed that the government provide further compensation to oil and gas companies to sell petrol at prices below market rates.

- In the long run, it is never a good idea for governments to subsidize petrol or diesel prices. Eventually rising crude oil prices will put an increasingly heavy burden on the government and cause the budget to run into a deficit, or worsen existing deficits.

On the inflationary front, it also didn't help that food prices, especially rice, have been on an uptrend in the past years (recent technical corrections notwithstanding). A CPI inflation rate of 25.2% is very high - if it goes any higher it would be heading into hyperinflationary territory.

See also :

1. China inflation surges to 8.7% in Feb 2008, highest in 11 years
2. Rice prices are steaming, with many implications
3. Thai rice price at new record high of US$1000 a tonne as Asian food crisis worsens
4. Global food crisis looms as Asia's rice bowl empties and world price soars
5. High food prices seen leading to strikes, protests in Asia
6. Rice price jumps to record high after doubling since 2007

(2008-06-05 22:00:44 SGT) [Biz] Permalink

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