HANOI, Vietnam: Surging food and construction costs drove Vietnam’s inflation rate to 25.2 percent in May, the highest in more than a decade, the government said Tuesday.
Despite authorities’ efforts to control inflation, including interest rate hikes, consumer prices were 4 percentage points higher than last month, according to the Government Statistics Office.
Vietnam’s inflation rate is among the highest in Asia, and higher food prices in particular are hurting the country’s poor.
Overall food costs were up 42.4 percent from a year ago, driven by a 67.8 percent jump in the price of grain, including rice, the staple food. Housing and construction materials rose 22.9 percent over last year.
Analysts say Vietnam’s surging inflation is being driven by both domestic and global forces, including soaring fuel and food costs. Rapid economic growth and looser lending policies in recent years, which has spurred investment, also have contributed.
The communist government has made fighting inflation its top priority. The central bank raised by interest rates 3 percentage points to restrain borrowing and encourage saving.
In the past few months, the government has also postponed public investment projects and ordered state agencies to cut spending by at least 10 percent.
The impact of these policy changes should be felt in the second-half of the year, said Jonathan Pincus, chief economist of the United Nations Development Program in Hanoi.
“The economy is still healthy, with exports and foreign direct investment soaring,” he said.
Vietnam’s exports were up 27 percent in May from a year ago, and foreign investment pledges reached US$15.3 billion in the first five months of this year, more than double the same period last year.
Still, authorities foresee slower growth ahead. Earlier this month, Vietnam slashed its annual growth target to 7 percent from 8.5 percent.