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March CPI predicted to rise by 0.5 per cent

Update: March, 03/2012 - 09:06

HA NOI — Market experts have said they expect the consumer price index (CPI) growth rate to fall to 0.4-0.5 per cent in March due to lower food prices, purchasing power and input prices.

Food prices were predicted to fall slightly in March but the price for chicken meat could rise due to bird flu, they said.

Prices for other essential goods such as sugar and fertiliser would reduce slightly because sugar output was expected to reach up to 250,000 tonnes and there would be a limited demand for fertiliser in the coming time.

Experts also said the price of rice would stabalise due to impacts from the world rice price and the temporary purchase of rice on the domestic market.

Many other positive factors could help maintain the stable price of goods and services and potentially even lead to price reductions from March through the end of the year, including the Government's solutions to stabilise the domestic market, curb inflation, good weather and the harvest season, according to the Ministry of Trade and Industry's Market Watch Team.

The experts also predicted that bank loan interest rates would reduce soon to create favourable conditions for enterprises to access credit, cut inventory and prevent stagnation.

Many organisations expect loan interest rates to reduce at the end of the first quarter or early in the second based on many market factors, including CPI.

So far, five banks – Agribank, BIDV, Vietinbank, Vietcombank and VIB – have cut loan interest rates.

Experts also predicted that the gap between the price for gold on the domestic market and its price on the world market would reduce to VND400,000 (US$19) per tael as a result of the Governor's plan to stop gold smuggling and price speculation. A tael equals 1.2 troy ounces.

The exchange rate between Vietnamese dong and foreign currency was expected to continue to stabilise to a 2-3 per cent growth rate this year, they said.

If inflation were to fall, it would not directly cause real income and inflation, and businesses would recover, reducing both unemployment and underemployment while attracting new labourers.

However, many factors could still boost prices. For example, an outbreak of bird flu would affect poultry supplies and create pressure to increase prices for other foods.

An increase in the world price and import price of petrol would force the domestic petrol price up. A 10 per cent increase in the price of coal for the fertiliser, paper and cement industries, which went into effect on February 25, would result in higher prices for goods in those sectors. Prices surges in the healthcare sector would also affect CPI.

If not effectively controlled, speculation and unreasonable price increases would also put pressure on the index.

To promote production, curb inflation and stabilise the macro economy, the Market Watch Team said the Government would find solutions to difficulties that enterprises were facing, including development of a flexible mechanism to import and export sugar, ongoing purchases of rice from farmers, and strict management of fertiliser import activities via border gates and smuggling of fertiliser.

To stabilise the prices of dairy products, the team said other cities and provinces should follow HCM City's lead to get large diary companies such as Vinamilk and Nutifood to commit to limiting price rises to only one or two times per year.

Market order

To establish market order, Vo Van Quyen, director of the Domestic Market Department under the Ministry of Industry and Trade, said the ministry would work with the Ministry of Finance and other relevant offices to promote inspections of petrol, oil and gas enterprise and penalise those involved in any trade violations in these sectors.

The ministry has asked oil, petrol and gas dealers to take responsibility for quality and price management in their distribution systems, from the wholesale stage to retail stage, and to avoid unreasonable price increases. — VNS

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