As the lunar New Year festival approaches, the prices of goods have soared as usual. But the increase has come earlier this year. As the Vietnamese dong continues to depreciate, people have been faced with increased living costs.

Ta Van Sy, a labourer at HCM City’s Tan Tao Industrial Park, said last month he had to send his wife and children back to their native province to cut costs as his family relies solely on his modest salary of VND2 million (US$102) a month.

“It is impossible to resist the price storm now,” says Sy, “I work on Sunday to send extra money to my wife and children in the countryside.”

To cope, workers have cut daily expenses dramatically.

Another worker, Pham Thi Vy, also earns about VND2 million a month and uses almost all of it to pay for cooking, electricity, water and her brother’s school tuition.

Vy says she recently moved into a 10q.m room with a friend to save money.

As of mid-August, the monthly price for a room near the industrial parks and export processing zones in HCM City increased by between VND50,000 (US$2.5) and VND100,000 ($5.1).

Prices for foods like rice, cooking oil, meat, and vegetables have also increased to dizzying levels.

Nguyen Thi Nhung, an employee at a State enterprise in Ha Noi, jokes that shopping in supermarkets is harder than performing magic tricks.

“I have very little money and everything is expensive and all prices are increasing,” Nhung says.

Economist Ngo Tri Long, former deputy head of the Market and Price Research Institute, attributes rising prices to multiple causes.

He says the exchange rate rise between Vietnamese dong and the US dollar is one factor.

Long says Viet Nam has been exposed to dollarisation (the holding by residents of foreign currency), meaning the impact of the rate adjustment may have been even stronger once imported goods are sold and people convert dollars to dong.

“The rate adjustment has devaluated the dong, causing increased input costs to produce goods,” Long says.

The economist also attributes price rise to the loss of consumer confidence and to the trend among traders of hoarding rice to export to neighbouring countries, a situation Long says will immediately affect prices.

According to deputy director of the Ha Noi Industry and Trade Department Nguyen Van Dong, the total commodity circulation in February will be about VND19.2 trillion in value ($960 million) or an increase by between 20 and 22 per cent compared with the earlier months.

He says Ha Noi will have to import pork from other provinces because it has met only 70 per cent of the city’s demand.

The inability to meet consumption demand will encourage hoarding or the spread of false information to raise prices and earn illegal profits, says deputy head of Ha Noi Market Watch Vuong Tri Dung.

To reduce pressure, Ha Noi authorities have decided to lend enterprises VND400 billion ($20.5 million) with preferential interest rates to help them stock goods for the lunar New Year period.

But Nguyen Minh Phong, an expert at the Ha Noi Socio-Economic Development Institute, says this will not be effective enough to stabilise market prices.

Phong suggests the State satisfy demand for foreign currencies among enterprises and apply drastic measures to stabilise the price of products like electricity, coal, water, and oil and gas.

Source: VNS