Sun, Nov 25, 2012 - Page 13 News List

Vietnam’s inflation climbs on healthcare, tuition costs

Bloomberg

Vietnam’s inflation quickened to a six-month high as healthcare and education costs climbed.

Consumer prices gained 7.08 percent this month from a year earlier, after rising 7 percent last month, the General Statistics Office in Hanoi said yesterday. That was the biggest increase since May and the third straight acceleration. Prices rose 0.47 percent from the previous month.

Inflation is at risk of accelerating toward the end of the year as the government encourages banks to cut lending rates and help businesses, the central bank’s monetary policy department deputy head Do Thi Nhung said on Nov. 5. Rising healthcare and education-related costs are adding to price pressures that may limit the monetary authority’s scope to support an economy set to grow at the slowest pace in 13 years.

“The normal policy in Vietnam on government-related services like health and education is to stop prices in those areas from increasing at times of high inflation, but the government has to let them go up eventually,” said Adam McCarty, a Hanoi-based economist with Mekong Economics.

The Vietnamese dong rose 0.1 percent against the US dollar on Friday, taking its gains for this year to 0.9 percent. The benchmark VN Index slipped 0.4 percent on Friday.

Prices in the category that covers healthcare and pharmaceuticals surged 45.4 percent from a year earlier, while education costs jumped 16.9 percent, according to yesterday’s statement. Transportation-related costs gained 7.4 percent.

Vietnam’s government has let prices of healthcare services and tuition rise “to take advantage of benign food inflation, as last year’s high inflation did not allow the government to raise healthcare and education fees,” HSBC Holdings PLC said in a report last month. “This is considered positive, in our view, as it allows the government to reduce the budget deficit and normalize prices.”

The nation is targeting growth of 5.2 percent for the year, faster than the 4.73 percent rate of the first nine months and the slowest pace since 1999. Elevated inflation, partly because of a weak macroeconomic management framework, is a “major downside risk” for Vietnam, the Organization for Economic Cooperation and Development said in a report last Sunday.

Vietnam will reduce borrowing costs next year as price pressures decrease, Vietnamese Prime Minister Nguyen Tan Dung told the National Assembly earlier this month.

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