Saturday, April 26, 2008

Vietnam’s inflation rises 21.4% as food costs surge

Vietnamese consumer prices rose 21.4 percent in April, the fastest pace since at least 1992, as surging global demand for commodities drove up the cost of food.
Inflation was the steepest since Vietnam was struggling to stabilize prices after failed economic policies of the 1980s. The General Statistics Office released the figures in Hanoi today. Accelerating inflation will make it more difficult for Prime Minister Nguyen Tan Dung to meet growth targets for the year, and is eroding the living standards of Vietnam’s 85 million population. Controlling inflation has become more challenging for the government as Vietnam’s accession to the World Trade Organization last year opened up the economy, Goldman Sachs Group Inc. said a report last week. “Inflation is a serious problem for Vietnam,” said Adam McCarty, chief economist at Mekong Economics Ltd. in Hong Kong. “Most of the big policies they've done to try to curb inflation have only been implemented in the past month, and it takes some time to feed through.” Prices increased 2.2 percent from last month. Higher food and energy costs are stoking inflation across the region. Singapore’s prices jumped the most in 26 years in March, Japan’s rose at the fastest pace in a decade, and inflation in Australia topped 4 percent for the first time in seven years. The government this year increased benchmark interest rates, told banks to raise the amount of money they have to keep on reserve, and sold more bills and bonds in an attempt to reduce money supply and slow inflation. ---------------------Stock slump The VN Index of stocks has slumped more than 44 percent this year, the worst performance of any global measure, on concern the government will curb lending. The benchmark five-year bond yield increased to the highest in almost two years as inflation quickened for 15 months. The increase in the consumer-price index was the biggest since at least 1992. The GSO declined to release comparable figures for 1992 and 1991, and the highest inflation rate in 1993 was 15.8 percent. In December 1990 Vietnam’s inflation was 67.1 percent, according to government data. “They had a hyper inflation crisis in the late 80s,” McCarty said. “In 1989 they implemented proper macro policies, and since the early 90s they’ve managed to keep it under control.” The increase this month has been worsened by rising global commodities prices, McCarty said. The jump was driven by food prices, which rose 38.2 percent from April 2007, and a 22.6 percent increase in housing and construction materials.
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