Inflation in Vietnam passes 27%

By Nga Pham
BBC News

Inflation and a fuel price hike have hit Vietnamese workers hard

Vietnam has reported an inflation rate of 27.04% in July, the highest so far this year.

This is also the largest year-on-year increase since 1991, when the country was deep in economic turmoil.

Yet experts warn the worst is still to come as this week’s hike in fuel prices takes its toll.

The Government Statistics Office said the consumer price index (CPI) for July alone had risen 1.13% on June's figure, slightly lower than in previous months.

However, prices are on the rise and August’s figures are expected to be much higher due to the impact of fuel prices.

Last Monday, Hanoi unexpectedly raised the petrol price by more than 30%, citing high costs in the world market. The decision was met by widespread public discontent.

Among the hardest hit are the poor and company workers, who have seen their wages melting fast in the heat of inflation.

But economists warn higher fuel costs will increase pressure on other commodities and services, thus making inflation rocket. Some estimate that the CPI increase for the whole year may exceed 30%.

They also warn public grievances may lead to social unrest, something the Hanoi government is extremely worried about.

Prime Minister Nguyen Tan Dung has ordered state companies to tighten their belts and cut back on their expenses as well as "unnecessary new investments".

He also promised a stricter monetary policy, making price control the "utmost priority" of his cabinet.

Mr Dung hopes to cut the inflation rate to a single digit in a year’s time. But in order to achieve that target, the Vietnamese government may have to sacrifice high economic growth rates.

The Asia Development Bank has recently reduced their growth forecast for Vietnam in 2008 to 6.5% from the previous 7%.