New Year, new prices: A Vietnam tradition

(c)Chuck Kuhn Photo

HANOI, Feb 11 (AFP) - Prices of groceries and other essentials have risen ahead of the Lunar New Year in Vietnam but consumers say that is a small price to pay to please their ancestors.

Shoppers say they have come to accept inflation during the New Year period, known locally as Tet, the most important festival of the year in Vietnam.

"Prices of all products have always gone higher prior to Tet," said Nguyen Thi Hien, 61, a Hanoi housewife who had just bought leaves to make "banh chung", a sticky rice cake filled with bean paste and meat. It is traditionally offered to ancestors during Tet, which begins on Sunday.

Family feasting is also part of the annual tradition.

"It's the time for us to spend money. We have to buy the best things for the ancestors, and for family members," Hien said.

A butcher, who gave her name only as Mai, said the price of meat had gone up by about 10 percent and business had been pretty good.

"It's Tet, so prices of everything increase," she said.

Hoang Mai Hoa, 27, an office worker and mother of a four-year-old daughter, said all essential goods are about 10 percent more costly.

"Many people go shopping and goods are always sold out," she said, adding that although prices are higher, people seem ready to spend.

"For me, Tet is the most important event of the year. Within my financial capacity, I am ready to buy the best food for my family."

State media said prices have jumped even though there seems to be an adequate supply of essential goods.

While there has been no official evidence of massive shortages, "shops and vendors continually take advantage of the high demand", the state Vietnam News wrote in an editorial on Wednesday.

Companies had stockpiled enough goods to meet demand, the newspaper quoted Deputy Minister of Industry and Trade, Nguyen Cam Tu, as saying.

Overall demand for goods had risen by 10 percent against a year ago, Tu said in the report.

Vietnam's economy rebounded from the global financial crisis and grew 5.32 percent last year but observers have expressed concern about a return to high inflation, which reached an annual 23 percent in 2008.

Consumer prices rose 6.88 percent in 2009, and were up 7.62 percent year-on-year in January, official figures showed.

While meat and other goods have become more expensive before Tet, clothes-seller Nguyen Van Anh said she has had to discount her stock because of unseasonably warm weather.

"The business this year is pretty bad. We have prepared, as usual, all the warm clothes for a cold Tet," Anh said.

But with recent summer-like temperatures, which residents say have been about 10 degrees Celsius (50 Fahrenheit) above normal, no one has been buying.

"I could not sell anything over the past two weeks," she said. (By Tran Thi Minh Ha/ AFP)

Vietnam to devalue Currency 4% by end of year

Vietnam will probably devalue its currency 4 percent by the end of the year, as the government prioritizes boosting exports to help growth ahead of fighting inflation, ANZ predicted.

The dong is currently trading at about 17,825 per dollar, down from 17,486 at the end of 2008, according to prices compiled by Bloomberg. The exchange rate will probably drop to 18,500 by year-end, wrote Tamara Henderson, a strategist at Australia & New Zealand Banking Group Ltd., in a research note Tuesday.

“The government’s priority at the moment is to get growth back on track and deal with inflationary pressures if and when they emerge,” Singapore-based Henderson said in a telephone interview Tuesday.

Vietnam is targeting economic growth of at least 5 percent this year, up from a 3.9 percent first-half expansion, and plans to revive exports after they declined 14 percent year-on-year through August.

The State Bank of Vietnam let the currency weaken 8.5 percent last year by widening the trading band, and lowering the reference rate.

Year-on-year inflation slowed to 2 percent through August, the lowest rate since 2002. A year-long deceleration in inflation is “almost certainly” over, with price pressures rising, ANZ said.

‘Long wait’

“Concerns about inflation have already started to weigh on the dong,” Henderson wrote in the note. Further weakening of the dong should support exports during the “long wait” for US and European consumer demand to pick up, she said.

“Devaluing the currency will also make imports more expensive, which can help address trade imbalances,” Henderson said by telephone. Any devaluation will probably take place toward the end of the year, she said. By the end of 2010, the currency is likely to trade at about 19,300 per dollar, according to ANZ.

Vietnam recorded a trade deficit of US$5.1 billion in the year through August, according to estimates from the General Statistics Office in Hanoi. The shortfall has “deteriorated sharply” from a surplus in the first quarter, ANZ said.

Foreign investment, both through projects and through the country’s stock markets, is “lackluster,” Henderson wrote.

“Without an imminent improvement in global demand conditions, Vietnam’s external position will quickly deteriorate,” she wrote.

Vietnam inflation eases to 24.2 pct in November

HANOI, Vietnam (AP) — Declining global oil and commodity prices slowed Vietnam's inflation for a third month in November but the rate remains one of the highest in Asia.
The consumer price index rose 24.2 percent from a year earlier in November, easing from 26.7 percent in October, the government said Tuesday. Inflation hit a 17-year high of 28.3 percent in August.
Vietnam usually releases economic data before the end of the reporting period based on estimates.
The government has cut fuel prices several times since August following a fall in the global oil price.
Transportation prices eased by 4.4 percent from October and housing and construction material prices fell 4.9 percent, the General Statistics Office said in a statement.
Food prices fell by 0.1 percent but were still 37.6 percent higher than a year earlier. Housing and construction materials rose 14.7 percent from November last year.
The government has forecast inflation of 22 percent for 2008.
Vietnam's economy has grown rapidly, expanding an average of 7 percent a year for the past decade, but began overheating last year with inflation skyrocketing and the trade deficit ballooning.
The government has predicted an annual growth rate of 6.7 percent for 2008. Last year, the country's economy expanded by 8.5 percent.

Inflation Delivers a Blow to Vietnam’s Spirits -

Even the ghosts are suffering from inflation in Vietnam this year.
August is the month when Buddhists ply the hungry ghosts of the dead with food and wine and cigarettes and honor them with paper offerings that represent the good things in life: cars, houses, motorbikes, stereo sets, fancy suits.
But like everything else in Vietnam, these brightly colored offerings have risen steeply in price, and shopkeepers say people are buying fewer gifts to burn for the dead.
With inflation rising to 27 percent last month — the highest in Asia — and food prices 74 percent above those a year ago, Vietnam is suffering its first serious downturn since it moved from a command economy to an open market nearly two decades ago.
Last month the government raised the price of gasoline by 31 percent to an all-time high of 19,000 dong ($1.19) per liter (or roughly $4.50 a gallon). Diesel and kerosene prices rose still higher. The country’s fledgling stock market, which had been booming a year ago, has fallen in volume by 95 percent and is at a virtual standstill.
Squeezed on all sides, people are cutting back on food, limiting travel, looking for second jobs, delaying major purchases and waiting for the cost of a wedding to go down before marrying.
Some village women who traveled to Hanoi to sell special homemade candies for the hungry ghost festival say they have not earned enough this year to return home.
Given this slowdown, Vietnam, Asia’s youngest tiger, which had been growing by about 8 percent a year for the past decade, is scaling back its plans for growth and economic development.
Last month the Asian Development Bank forecast that growth would slow to 6.5 percent this year. Some economists say even that figure is probably too high. Trade and current-account deficits have widened.
The mood in Vietnam, after years of upward mobility, is tense, said Kim N. B. Ninh, the Asia Foundation’s country representative.
“I think people are pessimistic,” she said. “You sense a tougher environment, a more restricted environment, a more pessimistic environment. It’s a moment of turmoil, I think.”
Some are losing confidence in the ability of the government to manage the economy. And rumors of price increases have caused panic buying of fuel and rice.
“The government seems confused about how to deal with the difficulties, and they have been making some mistakes in running the economy,” said a young lawyer who spoke on condition of anonymity when criticizing the government.
In part, economists say, Vietnam is suffering from the worldwide economic downturn and from high inflation that has spread through Southeast Asia.
But they say the problems are also self-inflicted, the result of an overheated economy as Vietnam raced forward with inadequate safeguards. Too much capital, particularly from foreign investment, has collided with bottlenecks in infrastructure and capacity.
The education system, meanwhile, has produced too few skilled and semiskilled workers for Vietnam to move up quickly into more complex manufacturing industries.
Hundreds of strikes at the factories that have been engines of Vietnam’s growth are some of the sharpest signs of discontent.
Some of the factory workers who are leading Vietnam’s rise from poverty are returning to the countryside, according to the local press, unable to sustain an urban life on a factory wage.
“Some people who have been moving from rural areas to seek jobs in industrial zones are deciding that it is not worth it, and people are moving home,” said Ben Wilkinson, associate director of the Vietnam program at the Kennedy School of Government at Harvard.
After a steep reduction in the poverty rate from 58 percent of the population in 1993 to around 15 percent last year, some people — including those who had bought their first motorbike or cellphone — are slipping back below the poverty line.
Prime Minister Nguyen Tan Dung told the National Assembly in May that the number of households going hungry had doubled in one year.
Everywhere they turn these days, people in Vietnam see higher prices.
more info-->>Inflation Delivers a Blow to Vietnam’s Spirits - NYTimes.com

Soaring inflation hits poor hardest

Continuing high inflation in Viet Nam has hit the most vulnerable people in society hard. To make matters worse, inflationary pressure is threatening to disrupt the Government’s plans on reducing the poverty rate, and as prices soar those who have managed to rise out of poverty are in danger of falling back under.
This month issue of our new magazine Outlook examines how the poor, students, low-income earners and farmers are struggling to cope with inflation – and what is being done to help them.
We report on the many people across the nation who are feeling the strain of rising prices and we find out why life isn’t getting any easier for farmers, who are supposed to be benefiting from higher prices for their produce.
Other stories on the plight of the poor in times of high inflation also include an interview with the Deputy Minister of Labour, Invalids and Social Affairs, Le Bach Hong, who says while soaring inflation may prevent this year’s poverty reduction targets being met, there’s a good chance the nation will still reach its goal of reducing the poverty rate to between 10 to 11 per cent by 2010.
Outlook, which goes on sale in Ha Noi, HCM City and other major centres this morning, also visits a village renowned for making hand fans, heads to the box office to check out the state of the Vietnamese film industry – and finds out how art lovers can impress friends with their very own Mona Lisa.
Outlook’s regular news round-up summarises major news developments around the country and the rest of the world. Readers can also catch up on what’s hot and what’s not in the country’s culinary and art scenes – and check out regular listings for everything from bars to embassies.
Outlook retails for VND15,000 at news-stands, major hotels and restaurants and at the head office of the Viet Nam News at 11 Tran Hung Dao, Ha Noi, or our HCM City office at 120 Nguyen Thi Minh Khai Street

Malaysians Fed Up with Prices, Politics

KUALA LUMPUR — Skyrocketing prices and an ongoing power struggle between the government and opposition have left many Malaysians fed up with their country's politics.
"We want prices lowered," housewife Aminah Rahman, 48, who took part in mass anti-inflation rallies held on Sunday, July 6, in the capital Kuala Lumpur, told Agence France Presse (AFP).
"We are suffering but the government appears to be doing nothing," added Aminah, who joined the all-day protests organized by the opposition coalition along with her two young daughters.
Over 10,000 Malaysians gathered at Kuala Lumpur's stadium to protest against the recent price hikes, including a rise of up to 63 per cent in fuel prices by the Abdullah Badawi government.
Protesters, many wearing red bandanas and red T-shirts with the slogan "No Price Hike", ignored a ban by the police which termed the demonstrations illegal.
The crowd chanted "PM resign" as speakers blamed the government of Prime Minister Abdullah for the towering prices.
"The people are suffering and I don't know how long we can go on like this," said 40-year-old housewife P. Kalaiselvi, who came to join the rally with her husband and four daughters.
"We would like the government to hear our problems and to help us but they are only helping themselves."
Malaysia's economy is already undergoing testing times.
Last month, the central bank said Malaysia's growth is expected to slow to 5-6 percent this year from 6.3 percent in 2007.
Anger over skyrocketing prices and rising inflation was seen as a major factor in the March elections results, which saw the ruling National Front coalition losing its two-third majority in the parliament and five states in the polls to the opposition.
"Political Drama"
For many Malaysians, the soaring prices are not the only reason for frustration.
They blame a prevailing atmosphere of politicking in their country for distracting politicians from addressing their sufferings.
"[I am] tired of reading about the political drama,” University student Nur Izza Mohd Ezani, 24, told the Malaysian daily The Star.
"I don't know what to believe any more. Everyone is accusing the other."
Since the landmark March elections, the South Asian Muslim country is embroiled in a deepening political turmoil, with the government and the recently-empowered opposition trading barbs.
Premier Abdullah, who is in power since 2003, has been under increasing pressures to step down.
The recent political storm came a week ago, when opposition leader and ex-deputy premier Anwar Ibrahim was hit with new sodomy charges, the same charge that led to his imprisonment a decade ago.
Anwar has blasted the new charges as a politically-motivated attack orchestrated by government officials and aimed at his comeback to his country's politics.
For many Malaysians, such ongoing power struggles is leaving people victims of their country's politics.
"They (politicians) should solve the problems among themselves before making it a public issue," Hajar, a 26-year-old legal secretary, told The Star.
Nur, the university student, agrees that politics is now running on the expense of people's welfare.
"They [politicians] are so concerned with party issues and the mud-slinging.
"I feel that things have been blown out of proportion and welfare is forgotten."

47 central construction projects suspended for inflation control

Central Thua Thien-Hue Province has postponed work on 47 construction projects in a move to curb inflation, the provincial People’s Committee said on Monday.


Projects that have been put on hold include some that are currently under construction, some that have yet to begin construction, and some that are deemed not urgent.

Funds that were originally allotted for the postponed projects will now go towards more important and urgent programs of industry, farming, education, health, transport and irrigation.

Vietnam may cut base rate in August -media | Reuters

Vietnam's central bank could cut its base rate, used by banks to set deposit and lending rates, from August, when inflation is expected to be under control, a state-run newspaper reported on Wednesday.

"The state will manage interest rates on a stable trend; at least in July (it) will not adjust the base rate but it could adjust the rate down in August," Ho Huu Hanh, director of the State Bank of Vietnam's (SBV) Ho Chi Minh City branch, was quoted as saying by the Liberation Saigon daily.

The rate cut could come "because inflation is forecast to be contained", Hanh was quoted by the newspaper as telling Vietnamese reporters at a briefing on Tuesday.

Foreign media were not invited to the briefing.

The State Bank of Vietnam raised its base rate to 14 percent in June from 12 percent, its third rate hike this year, as it sought to contain inflation, which hit 26.8 percent in June.

The consumer price index (CPI) rose 2.14 percent in June from May, smaller than the 3.9 percent increase in May from April, the government said.

Matt Hildebrandt, economic and credit researcher at JP Morgan Chase & Co in Singapore, said monthly changes in the CPI in July and August would need to be a lot lower than that 2.14 percent in June for him "to feel very confident in lowering rates".

"August might be a little too soon and we would feel more comfortable if they did it later in the year," Hildebrandt said. Continued...

Investors’ steely resolve

Despite rising inflation and widening trade deficit challenges, Vietnam is considered an attractive place for the international business community.
Martin Rama, acting country director of the World Bank in Vietnam, is in no doubt.“Unlike the previous forum held six months ago, when everybody was heartened by the impressive economic development of Vietnam, this time we gather here with major concerns about rising inflation and the widening trade deficit. But, I would like to say that Vietnam’s business climate is still as it used to be six months ago,” he told the Vietnam Business Forum (VBF) in Hanoi last weekHe said it was hard for Vietnam to avoid negative impacts from the global economic recession and skyrocketing fuel and food prices, but the Vietnamese government was on the right track to overcome these difficulties.
Rama was not the only high profile person at the VBF with an optimistic outlook on Vietnam’s economy. Business community representatives said Vietnam was still a good place for doing business despite recent evidence of economic instability such as rising inflation and a growing trade deficit

more info-->>>VietNamNet - Investors’ steely resolve

Indonesia, Philippines Raise Rates to Fight Inflation

Indonesia and the Philippines raised interest rates as surging food and energy prices prompt policy makers across Asia to tackle inflation even as growth slows.

Bank Indonesia increased borrowing costs for the second straight month today, raising the rate used as an indication for bill sales to 8.5 percent from 8.25 percent. Bangko Sentral ng Pilipinas raised its policy rate by a quarter of a percentage point to 5.25 percent, the first increase in more than two years.

Indonesia and the Philippines join Vietnam and Pakistan, which last month increased interest rates as near-record oil costs and surging rice and wheat prices stoke inflation. India and Malaysia may follow suit after their governments today raised petrol prices to stem crippling subsidy costs.

``It's a real dilemma for the central banks,'' said Robert Subbaraman, chief economist at Lehman Brothers Asia Ltd. ``They are facing their most testing time since the Asian crisis ten years ago.''

-Vietnam may be first domino among Asian economies | Reuters

Fitch's lowering of its outlook on Vietnam's sovereign rating on Thursday could be a sign of more weakness to come for many of Asia's economies and currencies, as record oil prices complicate their efforts to control inflation.

Fitch Ratings lowered the outlook on Vietnam's BB-minus rating to negative from stable, saying that authorities had not dealt quickly or strongly enough with inflation, potentially posing risks to banking system's stability. [ID:nHKG197848]

The agency cited the delicate position the government is now in, riding a fine line between containing price rises and setting off a sharp economic slowdown.

Some observers are even pointing to a potential currency crisis, given Vietnam's growing current account deficit, weakening fiscal position and limited foreign exchange reserves, on top of 25 percent annual inflation, the second-worst in Asia.

Some of Asia's largest economies are also grappling with the same risks. Although none look as vulnerable as Vietnam, some are set for their sternest test since the Asian financial crisis of 1997.

"I think (we could see) a much deeper and more prolonged slowdown than people are currently anticipating that lasts until the end of 2009, rather than being done shortly," said Bill Belchere, regional economist with Macquarie in Hong Kong.

The Philippines, South Korea and India share some of the problems that pushed Vietnam into its downward spiral.

In all three expensive oil imports are eroding their current accounts and dragging down currencies. Weak currencies are fuelling inflation, piling pressure on central banks to raise interest rates. Higher rates would hurt economic growth and stock markets, triggering a flight of capital needed to finance the trade gap. Continued...