News Room - Business/Economics

Prices shot up an estimated 3.91 percent between April and May alone, marking the highest month-to-month rise since 1995, during which there was some panic-buying of rice as prices surged, said the General Statistics Office (GSO).

Food and beverage costs rose by over 42 percent year-on-year, with the staple food – rice and other grains – up almost 68 percent in May compared to a year earlier, said the GSO.

The World Bank’s chief economist in Vietnam, Martin Rama, called the 25-percent inflation rate, which is the country’s highest in over a decade, “a worrying figure, a very high inflation rate.”

“Food prices have grown even faster,” he said.

“Food prices and especially rice prices have different impacts. They are good for farmers in the deltas, but bad for poor people in the cities and in remote regions who don’t grow rice.”

Non-food inflation reached 11.6 percent, Rama said.

Housing and construction materials rose 23 percent, clothing and footwear prices were up 9.5 percent, pharmaceuticals and health care increased by 8.2 percent, and the cost of household goods and appliances rose by 7.5 percent.

For the first five months of the year, prices rose by 15.96 percent.

Inflation driven by record high global oil and food prices has hit much of Asia this year.

But especially in Vietnam, a country of 86 million, galloping prices have stoked public anger and fears of food shortages.

In late April, many supermarkets ran out of rice in Ho Chi Minh City and other localities as consumers, worried by rumors of looming shortages, queued to stock up on rice, further driving up retail prices.

Prime Minister Nguyen Tan Dung stressed that Vietnam, the world’s number-two rice exporter, has enough stocks to meet domestic and export demand and warned speculators driving up prices of “severe punishment.”

Rising prices have outpaced wage increases and fueled strikes in Vietnam.

Factories were hit by 295 labor strikes in the first three months of 2008, the official labor union reported.

Vietnam has made fighting inflation its top priority and has reduced its 2008 economic growth target to 7 percent, from last year’s 8.5 percent.

The government has raised interest rates to increase savings and limit credit growth, while cutting some public investment projects to reduce inflation.

“It remains to be seen whether, after the turbulence of rice prices, inflation will be back on a downward trend starting next month to show the stabilization package is working,” said Rama.