Economists fear gas price hike will fuel inflation in Vietnam

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Economists are warning that the recent 10-percent increase in price of gasoline will cause consumer prices to surge, making it much more difficult for the government to limit inflation to single digits.

Inflation was expected to fall below 10 percent this year, but consumer prices have already risen 2.36 percent in the first two months alone, leaving only 6.64 percent for the remaining ten months, said Ngo Tri Long, former deputy head of the Market and Price Research Institute.

Now that fuel prices have been raised, there will be more upward pressure on consumer prices, Long told news website VnExpress, adding that electricity may also receive a price hike in the near future.

The Ministry of Finance on Wednesday allowed traders to raise retail prices of 92-RON gasoline, the most commonly used fuel grade in Vietnam, to a record high of VND22,900 per liter.

According to the ministry, the increase could add an extra 0.84 percentage point to the consumer price index this year.

Inflation eased to 16.44 percent year-on-year in February from 17.27 percent in January. It hit 23 percent in August of last year.

Economist Le Dang Doanh said the recent price hike would have a negative impact on public confidence since fuel represents a significant portion of the total input costs of many production sectors.

The government needs to be very cautious with price management to prevent inflation from getting out of control in the first months of the year, as was the case in 2011, he said.

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