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Inflation statistics and confidence levels

As a reporter in charge of macroeconomic news, I always seek to read statistics because figures are not biased and allow me to have an overall view of things. But, honestly speaking, not all statistics give me a sense of confidence.

Vietnam’s inflation rate is lowest in the world

While many other countries only use consumer price index (CPI) to measure inflation, the data about inflation rate and CPI of Vietnam are quite diverse and complicated, which makes it difficult for people, including scholars and experts, to understand.

For example, the General Statistics Office (GSO) reported that the CPI in June increased by 0.69 percent over the previous month, 3.18 percent compared with December 2021, and 3.37 percent over the same period last year. 

In H1, the CPI increased by 2.44 percent compared with the same period last year and the core inflation rate was 1.25 percent.

A report from the Ministry of Planning and Investment (MPI) was more detailed. It said the CPI in the first six months of the year increased by 2.44 percent in comparison with the same period last year; the core inflation in June increased by 0.44 percent over the previous month and 1.98 percent over the same period last year. 

In H1, the core inflation increased by 1.25 percent compared with the same period last year and lower than the overall average CPI (2.44 percent).

The core inflation is the CPI after deducting the prices of fresh food and foodstuff, power, and goods under the state’s management, including healthcare and education services.

As such, the figures about inflation and CPI are diverse as they are compared with different moments. However, there is a commonality: they all show that Vietnam’s inflation rate is lower than that in the world.

Many countries are experiencing 4-decade high inflation. The UK reported an inflation rate of 9 percent in May, the US 8.6 percent, Germany 7.9 percent, France 5.2 percent, Italy 6.9 percent and Spain 8.7 percent. The inflation rates were 9.6 percent for OECD countries, 8.8 percent for G20 and 8.8 percent for the EU.

Their inflation stems from many causes, including a crude oil price hike, the side effects of economic stimulus packages and the disruption of production chains and a food and foodstuff shortage.

The problem is that while other countries report high inflation rates, Vietnam, an economy with high openness as a member of 14 next-generation free trade agreements (FTAs), still has low inflation.

Does self-sufficiency make inflation low?

According to GSO, the monthly CPI is calculated by the agency based on information collected from 40,000 survey points and the prices of 752 common goods and services in 63 cities/provinces.

This number of samples is very large and GDP needs a large workforce for sampling and if someone makes a mistake, the results will be wrong.

Some local statistical leaders have told me that sampling is very difficult work and in many cases, it doesn’t bring effects. However, reports still need to be sent.

An official of GSO, when giving an interview to Giao Thong newspaper, related a story about prices in Hanoi and HCM City increasing sharply, but prices in Ha Giang remaining unchanged. When asked about the difference, an official of Ha Giang answered that this is a mountainous area, where people are self-sufficient. They can grow rice, vegetables and raise pigs and fowl. If the prices at market increase, no one will buy products.

Meanwhile, statistical officers bear pressure from local authorities which always want high growth rates in their localities. Some localities reported very high growth rates in H1, such as Bac Giang (24 percent), Bac Ninh (14.7 percent), Thanh Hoa (13.4 percent), Quang Nam (12.8 percent), Khanh Hoa (12.9 percent), Hai Duong (11.8 percent), Hai Phong (11.1 percent), Quang Ninh (10.7 percent) and Vinh Phuc (10.1 percent).

Retelling the story, I do not mean that the statistics about CPI, inflation and GDP are fabricated or embellished. Instead, there’s a question about whether incorrect input materials produce the wrong output statistics.

Abnormalities

In the first half of the year, the CPI only increased by 2.44 percent while core inflation increased by 1.25 percent over the same period last year. The figure was extremely abnormal compared with the core inflation with Vietnam dong interest rates.

The deposit interest rates at some commercial banks have soared to 7-7.3 percent, while lending interest rates rose to 10-12 percent.

Such high interest rates are a contrast to the reported low inflation rate. In general, deposit interest rates need to be higher than the inflation rate by at least three percentage points to be able to attract depositors.

Tu Giang - Lan Anh

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