2018: Gasoline prices impact on CPI is not worrying

Two times of gasoline increase in January 2018 contributed to the increase of traffic sector, pushed CPI up in January. Photo: H. Anh.

Gasoline increase pushes CPI up

According to the General Statistics Office (GSO), CPI increased by 0.51% in January 2018 compared to December 2017. According to the analysis of the GSO, January is the approaching time of Tet Holiday, therefore the consumer demand of people, enterprises, agencies have increased over the previous months. Of all reasons for the CPI rise, the main one comes from transportation, medicines and health services. In which, the two increases of gasoline prices and the annual increase of train ticket approved by the General Vietnam Railways at the end of the year by 6.54% also contribute to the CPI increase of 0.11%. Specifically, in January 2018, two increases of gasoline prices on January 4, 2018, and January 19, 2018 led the average fuel price index in January 2018 increase by 2.65% compared to the previous month, contributing 0.11% to CPI increase. "The general inflation is higher than the basic level, which is reflecting price fluctuations due to the increasing market price by adjusting the price of essential commodities such as electricity, petrol and medical services ...", according to the General Statistics Department.

Regarding CPI in January, Mr. Dinh Tuan Minh – an economic expert - stated that this number is tending to increase significantly. The CPI of the same period in 2017 is much lower than the CPI this year. Hence, we need to pay attention to this situation in the context of the economy in the future.

According to the Vietnamese National Center for Socio-economic Information and Forecast (NCIF), the consumer price index of January 2018 increased by 0.51%. This is a relatively high increase. One of the main causes, according to the NCIF, is that besides the roadmap for raising the price of health services, the increase in domestic petroleum prices in line with world prices also increases the traffic price by 1.17%, which affected commodity prices in general. As a result, it is difficult to control inflation in the next months.

Perhaps for this reason, to regulate the price of gasoline in accordance with the market mechanism under the management of the State, contributing to control inflation, limit CPI increase, and to support enterprises in production and business activities, stabilize consumer psychology on Tet holiday, in the first price adjustment of gasoline in February, 2018, Ministry of Industry and Trade - Finance decided to stabilize prices of petroleum products. To maintain the petrol price, the deduction from the Fuel Price Stabilization Fund for every petroleum product has changed, such as: 1,141 VND/ liter for E5 RON92 petrol, while we spent 857 VND/ liter in the previous period; 400 VND/ liter for RON95, 678 VND/ liter for diesel oil, while we spent 400 VND/ liter in the previous period...

CPI 2018 higher than CPI 2017?

Earlier, at the end of January, the Prime Minister requested the Ministry of Finance and the Ministry of Industry and Trade to chair and coordinate with relevant ministries and agencies to review, synthesize and report on petroleum price fluctuation in recent time. Specifically, the Prime Minister assigned the Ministry of Finance and the Ministry of Industry and Trade to chair and coordinate with relevant ministries and agencies to review, synthesize and report on the recent fluctuation of gasoline prices, the difference in price of petrol products and its causes, tax and fee policies related to gasoline and the operation of the Fuel Price Stabilization Fund,... Based on that, we will make proper recommendations and solutions.

In fact, the change of gasoline prices will lead to certain fluctuations in prices of other commodities, leading to changes in the CPI. According to experts, theoretically, when the price of petroleum fluctuates, the level of direct impact on the CPI is not too serious. However, gasoline is a factor reflecting the input costs of many other products in the "basket" of CPI goods, therefore, the adjustment of petrol prices has always been considered as the factor impacting on the CPI, especially in the upward trend. In 2018, the world petroleum market is predicted to continue the uptrend in 2017, but the momentum increase is not expected to be strong. International organizations forecast that the average world crude oil prices in 2018 will range from $ 50-55 per barrel. Accordingly, the domestic gasoline prices are projected to increase by 5-15% and will affect the overall CPI around 0.28-0.64%.

Commenting on CPI developments as well as impacts of petrol prices on the economy in general, CPI in particular, according to Dr. Nguyen Duc Do, deputy head of the Institute of Economics and Finance (Ministry of Finance), CPI increase in January and February is normal, not too concerned, and the general inflation in 2018 will still be under control. It is difficult to forecast how much petrol price in the year will be because no one can predict it. Oil prices are currently at an average of $ 60/ barrel and may fall to $ 50/ barrel, like the decline of the stock market. Not to mention, if the US economy slows down, then oil prices may plummet. In the context of rising oil prices, the CPI will rise a bit but will remain under control. Dr. Nguyen Duc Do also said that it is difficult for the oil price to increase to more than $ 70 per barrel because of the plentiful current supply of shale oil. "In the past few years, the price of oil has been low due to the large supply of shale oil, so the possibility of an increase in oil prices is not high but a reduction of $ 50/ barrel. It is difficult to accurately forecast about oil price but it will be in the range of 50-70 USD / barrel, so the fluctuation is not much. And with this increase, the impact on CPI is negligible", said Nguyen Duc Do.

Regarding the CPI and economic forecast for 2018, the NCIF said that Vietnam economy also faces the challenges that affect growth, trade and investment activities. One of the challenges is that the CPI has risen sharply since the beginning of the year, and it is predicted that CPI in 2018 will be higher than 2017, which may affect consumer sentiment, and lead to reduce private consumption as well as strengthen the trend of saving in households. According to experts, in order to achieve the target of a 4% increase in average consumer prices, the price management and stabilization should be strengthened continuously to control inflation, ensuring the objective of stabilizing the economy. At the same time, the CPI evolution should be closely monitored to apply proper adjustments in time.