Strict measures to control inflation should remain in place

The CPI during the first nine months of 2016 also rose 2.07% over the same period of last year. There were many reasons for the CPI increase, one of which is a 29.09% surge in healthcare costs as upward adjustments to healthcare services began to take effect from March. Increased tuition fees also pushed up inflation. In addition, a number of long holidays such as Lunar New Year, Hung Kings Commemoration and Reunification Day boosted demand for food and entertainment services. Other factors included higher fuel costs and higher food prices as a result of extreme weather, drought and saltwater intrusion.

Despite facing plenty of inflationary pressure, the CPI over the last nine months still remained at a fairly stable level thanks to the government’s efforts to curb inflation with various measures. For example, in anticipation of increased education and fuel costs in September, the government ordered a slowdown of the healthcare cost adjustment plan to avoid an abrupt increase in CPI. As such with a CPI increase of 3.14% in the first nine months of 2016, there is still plenty of room to achieve the target inflation of less than 5% for the whole year.

Nevertheless the CPI in the remainder of the year is still weighed down by many factors such as continued adjustments to healthcare costs, rallying oil prices and higher demand for essential goods at the end of the year. The government and parliament’s determination to maintain a growth target of 6.7% for the entire year is also a big challenge, requiring greater efforts from all sectors.

The government should continue to ask ministries and agencies to follow market developments closely and only increase the prices of essential goods at appropriate times in order to prevent further pressure on the CPI. The Ministry of Industry and Trade should request enterprises to stock goods and stand ready to stabilise the market and prevent sudden price increases at the end of the year. The Ministry of Finance must also step up market control measures and collaborate closely with the Ministry of Industry and Trade to regulate petrol prices properly in order to attain the goal of macroeconomic stability.