Inflation in Vietnam rose in May
Fuel prices the main cause of inflation increase
According to the data from Vietnam’s General Statistics Office, Vietnam’s Consumer Price Index (CPI) rose 3.86% year-on-year.
This increase had the strongest effect on transportation services (rise of 1.72% compared to April), followed by food and beverages (0.88%), and housing, construction and utilities (0.34%). The main cause of a growing CPI was the increase of fuel prices on May 8 and May 23, increasing on average 4 US cents per liter.
The increased fuel prices directly affected the fares transportation services charge. In 2016, 77% of all goods in Vietnam were transported by land, a type of transport that is 10 times more expensive than water transport. Hence, with the fuel price increases, general consumer prices grew accordingly.
In addition to recent fuel price increases, the Government has planned a new environmental tax on fuels, which if ratified will be in effect from July 2018. Under this plan, the fuel prices will grow for 33%, which would increase the average gasoline price per liter for 17 US cents. According to economists, if this tax scheme is approved, we can expect to see further increase of inflation and the CPI.
With different measures implemented, Vietnam’s Government has managed to keep inflation low in the previous few years, with forecasted inflation rates for 2018 and 2019 also being low. However, with the latest and planned fuel price hikes, it is questionable if inflation of 3.7% will be achievable for Vietnam in 2018.
Vietnam inflation since 2012 (sources: Trading Economics & Asian Development Bank)
2012 -- 17%
2013 -- 6%
2014 -- 5%
2015 -- 1%
2016 -- 1%
2017 -- 5%
2018 -- 3.7% (expected)
2019 -- 4% (expected)