The consumer price index has risen by only 3% year-on-year in HCMC, but local resident Hanh says her family’s actual expenses seemed to have risen by “10 time that figure.”
She asserts that her monthly spending has increased by over 30% from a year earlier, including on rent and her children’s school fees among others.
Another city resident, Lam, says her family has stopped eating out this year due to rising utility, tuition and food bills.
A typical family meal now costs VND200,000 (US$7.58) compared to VND120,000 last year, she adds.
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A customer shops in a supermarket in HCMC. Photo by VnExpress/Thi Ha |
Analysts say that the gap between CPI figures and citizens’ perception of rising prices is a common global phenomenon.
Nguyen Trung Tien, deputy director general of the General Statistics Office, says surveys in Europe in 2022 showed that when rising gas and food prices pushed inflation to 9-10%, people felt their expenses had gone up by 30-40%.
In the U.S., a 7-8% CPI increase is perceived by many as a 20-30% hike in living costs.
Tien says there is a lag between actual price rises and their reflection in the CPI.
For instance, if fuel prices rise mid-month, the index for that month registers only part of the increase since prices were lower early in the month while consumers are already paying the higher costs, he says.
Bedsides, the CPI basket excludes some major urban expenses such as mortgage interest and private tutoring, he points out.
He warns about the deleterious effect of any weakening of consumer demand on production and employment.
“Household consumption accounts for more than 55% of GDP. If demand contracts, it risks creating a negative cycle: rising living costs, slower production, shrinking jobs, and further weakening of consumption.”
Economist Dinh The Hien says food and public service costs have risen mostly due to higher rents and new tax regulations for smaller vendors, who in turn raise their prices to offset higher expenses.
“This trend can reduce spending and weaken the economy.”
Nguyen Duc Do, deputy director of the Institute of Financial Economics, says people’s perception of inflation is influenced by longer timeframes.
A 3% increase in CPI is measured over a year, but people usually recall prices over longer horizons, and so they feel inflation is higher than indicated by official data, he explains.
Over the past decade CPI has averaged 3% a year, meaning prices have risen by 34.4%.
Hien suggests Vietnam should develop more detailed indices reflecting specific regions and product groups rather than relying on only CPI.
He questions the government’s “price stabilization” policies for competitive goods, arguing that pricing should be left to the market. Businesses will then be forced to innovate and cut costs to survive, he says.
The government should only regulate monopoly sectors such as transport, electricity, and infrastructure, he adds.
Overall, analysts believe an inflation rate of 3% does not threaten economic stability.
The greater concern is that household income growth is failing to keep up even as the prices of certain essential goods rise disproportionately, especially for lower- and middle-income people, they say.
“The challenge is not just keeping CPI low, but ensuring wages grow enough for people to maintain their standard of living. Without that, low inflation alone brings little relief,” Do said.
