VietNamNet Bridge – The possible imbalance of food and foodstuff supply and demand in the last months of the year, the high consumer season, will be the main factor in the increase of the inflation rate.

The General Statistics Office has announced the CPI growth rate of 0.51% for September, raising the CPI growth rate in the first nine months of the year to 7.32% (8.8% if compared to the same period of 2006).

Experts say that the CPI growth rate may hit the 9% threshold. In the ‘low scenario’, if the CPI increases slightly by 1.3% as it did in the fourth quarter of 2006, the CPI growth rate for 2007 as a whole would be 8.8%, or higher than the GDP growth rate.

Statistics show that the main culprits of the high inflation rate are food and foodstuff products. While consumer prices in general have increased by 0.51% only, these products have increased sharply by 1.02%.

While the decision by the government on cutting taxes has helped curb the price increases of non-food products, the tax cuts have not shown any effects on food and foodstuffs. Three reasons can be cited to explain this.

First, Vietnam exports agricultural produce on a large scale, and the prices of produce remain at low levels on the domestic market. As most Vietnamese people are poor, imported food and foodstuffs are not their choice. Therefore, it is not so easy to import food and foodstuffs to sell in Vietnam.

Second, the continuing animal epidemics have made the supply shortage more serious and pushed prices up. Five out of eight regions saw food and foodstuff prices increase by more than 1%, and one region approximately 1% in September.

Third, the domestic rice market and the world’s market have close links since Vietnam is a rice exporter. Therefore, the rice price fever in the world’s market has certainly led to the rice price increases in Vietnam.

Fourth, the increased prices of fertiliser, pesticide and varieties have surely resulted in the rice price increases. And the increased price of rice has resulted in the price increases of other food and farm produce.

The analysis shows that in order to curb inflation, in the coming months, the government should focus on measures to treat the price increases of food and foodstuff products.

(Source: SGTT)