Vietnam Inflation Hits Hard

Surging inflation, a sinking stock market, and spreading labor strikes all signal trouble for Vietnam's economy.
2008-06-18
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HANOI, Vietnam: Vegetable vendors in Hanoi, May 27, 2008.
HANOI, Vietnam: Vegetable vendors in Hanoi, May 27, 2008.
AFP photo

BANGKOK—Vietnam says its surging 25 percent inflation should ease in 2009, but the pain of high prices remains acute—and the poor are suffering most, according to Vietnamese citizens and economists.

“Skyrocketing prices and rising inflation will affect the poor, first and most,” Nguyen Quang A, director of the nongovernmental Institute of Development Studies in Hanoi. “Their incomes are low to begin with, but now they have to pay more for food and other necessities.”

“Their lives are more and more difficult. Rising inflation will increase the number of poor families in Vietnam,” he said.

Tran Dinh Thien, director of the government’s Vietnam Economy Institute, agreed. “Inflation hurts low-income people most,” Thien said.

“Government and business must work together to improve the stability of their workers' morale and jobs, as well.”

"Workers feel they have no choice but to strike because their salaries and job benefits are so low."

Female textile worker

Hopes to control prices

Vietnamese Finance Minister Vu Van Ninh told an economic forum in Malaysia on June 15 that the government was determined to control surging price pressures. He also said the country would likely post double-digit inflation this year.

“This year inflation might be two digits,” Vu said. “In 2009, we hope we can reduce it to one-digit inflation.”

But the problems are widespread, including spreading strikes, a plunging stock market, and a devalued currency.

Public distrust

Tran Van Binh, a professor at Ho Chi Minh City Economic University, said public distrust of official figures posed another challenge—suggesting inflation might actually be far worse.

“In Vietnam, the General Department of Statistics is the appropriate authority to announce the data, and the information they collect is official. But people don’t have confidence in their information,” Binh said.

Everything costs more

“Everything is increasing,” one domestic worker in Ho Chi Minh City said.

“Even if salaries were increasing, they still wouldn’t meet these rising prices. The poor are facing many difficulties—now they just hope to have enough rice for their children, since the price of meat is increasing every day and they cannot afford to buy it.”

Major challenge

Vietnam's ruling Communist Party is facing one of its biggest challenges with yearly inflation in double digits for seven consecutive months, hitting 25.2 percent in May.

Soaring imports have tripled the trade deficit this year to $14.4 billion, while the Vietnamese stock market has lost 60 percent in the same period, making it the world's worst performing market.

"The poor...just hope to have enough rice for their children..."

Domestic worker

Vietnam's central bank raised interest rates last week and devalued the national currency, the dong, by 1.96 percent to try to fight inflation and currency speculation.

The government last month slashed its growth target for this year to 7 percent from a range of between 8.5 percent and 9 percent. The economy grew 8.5 percent last year.

Good plans on paper


The Asian Development Bank (ADB) country director for Vietnam, Ayumi Konishi, said Hanoi had produced some good economic plans.

“Prime Minister Nguyen Tan Dung brought out an eight-point solution package over two months ago,” Konishi said. “I believed those specific plans are feasible, and I supported it. However, one is still waiting for those plans to be implemented….”

Strikes spread

Vietnam has also faced a series of strikes by workers unable to make ends meet. Among other work stoppages, nearly 800 workers from Daeyon Company, a Korean shoe manufacturer in the Linh Chung Manufacturing Complex in Thu Duc, walked off the job on May 30.

Almost 1,000 workers at the Vietnam Panasonic Communications Co., in Thang Long Industrial Complex in Dong Anh, Hanoi, stopped working to demand higher salaries and overtime compensation.

“Workers feel they have no choice but to strike because their salaries and job benefits are so low,” one female textile worker said, adding that surviving on 500,000 to 1,000,000 dong monthly (about U.S. $55), was now impossible.

“In my opinion, the Vietnamese government must speak with businesses or initiate [something] for the benefit of Vietnamese workers. Businesses must give their employees adequate benefits. They have their own responsibility, but the Vietnamese government must share it.”

“The strikes have become worse because the rise in inflation is outpacing increases in workers’ salaries,” economist Le Dang Doanh, a former adviser to prime minister Phan Van Khai and the ruling Communist Party, said.

“Workers stage strikes for several reasons. The most obvious reason is that workers are not satisfied with their pay and treatment by employers.”

Original reporting by Nha Tran, Nam Nguyen, and Mac Lam for RFA’s Vietnamese service. Service director: Diem Nguyen. Executive producer: Susan Lavery. Written and produced in English by Sarah Jackson-Han.

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