At a street-side market in Hanoi’s Dinh Cong Street, Nguyen Thi Ha does not tarry long at the meat stalls as she shops with her small daughter.

She buys more vegetables and tofu, and very little meat and fish. Ha’s new diet is not a health fad. It is dictated solely by economic considerations.

The 40-year-old, who works as a clerk for a private confectionery firm with a moderate monthly income of VND3 million (US$142.9), says she has no choice. “Everything now is very expensive, while my salary is limited. The only way we can manage now is by cutting expenses.”

Consumer prices in Vietnam have increased sharply following the 24 percent increase in gasoline and diesel prices late last month. The rise in fuel prices was widely expected after the dong was devalued in February, pushing up the cost of imported fuel. Following the fuel price hike, electricity prices increased 15.28 percent on March 1.

Inflation accelerated to a two-year high of 12.31 percent in February, far higher than in neighboring nations.

Like Ha, many people have cut spending and are seeking more part-time jobs to increase their meager incomes.

For Nguyen Tran Duc, a customer-service staff member at an electronics firm in Hanoi, the higher prices mean cutting back on dining out and holiday tours for the family.

“We had planned to travel to Nha Trang this summer. However, we may reconsider it. Airlines do not offer low-priced tickets as they did years ago, while restaurant and hotel costs are steep,” he said. “We have to be frugal now.”

Duc is better off than many of his compatriots in a country where the per capita income is some $1,200 per year.

Nguyen Thi Nu, a 45-year-old woman from Nam Dinh Province, earns about VND80,000 a day from trading in scrap and cleaning homes. Her solution to the rising prices is to scrimp on cooking.

“I have no way to earn more, and prices are climbing up every day. Meat prices have recently gone up 40 percent. My daily income can afford just 300 grams of beef. We have to accept eating less.”

Inflation has affected residents at all economic levels. While the better off cut back on luxuries, low income earners have to cut back on essentials like food, fuel, shelter and clothing.

Nguyen Lan Huong, head of the Labor and Social Science Institute, said if the prices of food and non-food products respectively rise by 19 percent and 6 percent, the spending of households will go down by 5-10 percent, according to a recent research done on inflation’s impacts on poverty and employment. “When prices of essential products such as food, health, education and transport services increase, the poor will suffer most. Up to 70-80 percent of their income is spent on essential goods and services.”

Meanwhile, increases in laborers’ wages are often lower than, and conducted later than price hikes, so their life is not improved because of higher spending, she said.

Le Kim Dung, interim country director of Oxfam Great Britain in Vietnam, said: “When food prices rise, people would buy less as a coping strategy, and usually it would affect the quality of food consumed by poor families the most.

“Urban poor or near-poor people end up spending almost all of their income on food and other essential needs; for example, accommodation, power and water, and have few savings, and are thus more vulnerable to different kinds of risks, especially sickness.”

She said many other Southeast Asian countries now are also seeing higher prices of essential food products, but the current situation is not as serious as 2008, when many families had to cut their meals from three to one every day. “However, if the situation continues to last for a longer time, it will hurt poor people and people with unstable incomes.”

Difficult task

With the establishment of a higher price floor, the government’s task of curbing inflation has become more difficult. Since early this month, many supermarkets have raised the prices of food and home appliances by 5-15 percent.

Some experts have said that the goal of keeping inflation under 7 percent this year is impossible to reach. Le Dinh An, director of the National Center for Socio-Economic Information and Forecasting, said normally inflation will ease to only 0.1-0.5 percent in March – the month after the lunar new year holiday. But this year, March’s inflation will be at least 1.5 percent, he said.

Le Xuan Nghia, a senior advisor to the government, said inflation may reach 9 percent by the end of the year. 

Vietnam has always had higher inflation than other Asian countries. Its average inflation over the past 10 years is 8.8 percent, compared with 2.7 percent in Thailand and 5.1 percent in the Philippines, according to the World Bank. This shows that Vietnam has attached more importance to economic growth than macroeconomic stabilization, the bank said.

In a move to curb inflation and revive investor confidence, the government has restrained lending growth and narrowed the budget deficit. It has cut the credit-growth target to below 20 percent from 23 percent for 2011, and aims to narrow the budget deficit to less than 5 percent of the GDP this year.

Unable to wait for the government’s measures to show their effect, Nguyen Van An, a retired worker has taken on a part-time job as a way to cope with the increasing prices. “I work as a motorbike taxi driver for two hours a day. Every day, I take my neighbor’s son to his school, and take him back home,” he said. “I earn VND50,000 a day from this work. It is not much, but enough for my family’s spending on food.”