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Prices skyrocket as purchasing power crumbles

Rising input costs have forced manufacturers to raise their selling prices. However, purchasing power is weak, which is a warning for a difficult year ahead.

Nguyen Thi Thin, 52, was recently seen sitting quietly in her pho shop on Nguyen Van Cu Street in Hanoi’s Long Bien District. She is one of the millions of people who have been hit hard by the pandemic.

Thin once ran a pho (Vietnamese noodle soup) shop in Bai Chay, Quang Ninh province. When the pandemic broke, she closed the store and returned to Hanoi with a significant debt of nearly VND 1 billion. She opened a store across the street selling breakfast food to earn a living.

However, she still hasn’t had any luck in Hanoi.

She did not have to pay rent during two months of confinement and reopened the store in accordance with the decision of municipal authorities. The landlord lowered the rent to VND 5million for 3 months, but she doesn’t have many clients these days.

“There was a lot of traffic on the streets in the past, but it’s quiet now because of the pandemic, so there are very few customers,” she said.

“People tend to have breakfast at home rather than eating out,” she explained, adding that she had to sell at least 200 bowls of pho a day to make a profit.

High prices

Another cause of poor business performance is input price increases. She complained that even if the prices of raw materials increase, she cannot increase the selling prices for fear of losing customers.

“In previous years, a 30,000 VND bowl of pho had a cost price of 24,000 VND. Now the cost price is 27,000-28,000 VND and the selling price is the same, ”she said.

Thin is not alone. The pandemic has changed everything and is wreaking havoc in all areas of activity.

Construction contractors are under pressure as steel prices skyrocket and steelmakers complain about escalating ore prices. Farmers are worried about soaring fertilizer prices. Transportation companies are still affected by rising oil prices. Land prices are rising in all cities and provinces, affecting people’s dreams of owning a home.

The price of steel started to climb in December 2020 and the “steel fever” lasted until June 2021 due to rising commodity prices. Ingot steel prices in May 2021 increased by 62% compared to February 2020, from 9,433,697 VND to 15,278,360 VND per tonne and by 41% compared to December 2020, from 10,800,000 VND to 15,278,360 VND.

HRC (Hot Rolled Coil) steel prices in May 2021 were 94% higher than in February 2020 and 48% higher than in December 2020.

Oil prices have fluctuated. The price of RON 95 gasoline was 16,930 VND per liter on January 11, 2021, while the E5 was 15,940 VND. The numbers soared to 24,990 VND (+ 8,060 VND) and 23,660 VND (+ 7,720), respectively, on November 10, 2021.

Oil prices have fallen recently but are still at high levels, around VND22.080 for E5 and VND22.800 for RON 95.

As for gasoline prices, retail prices were raised nine times in January, February, March, June, July, August, September, October and November, and lowered twice in April and May. The total increase was 100,000 VND per 12 kg tank compared to the end of 2020. It was not until early December that the price started to drop by 24,000 VND per tank after days of trading. successive increases.

According to the task force responsible for regulating the domestic market, the prices of most of the materials used to make animal feed increased from 2.38 to 49 percent, leading to an increase in the prices of poultry feed by 30 percent. percent and for pigs 32 percent. .

The price increases of these products explain why the cost price of Thin’s pho has increased.

Low purchasing power

Although input costs increased, Thin did not increase the selling price of his pho. Manufacturers also do not dare to increase sales prices because demand is low.

Prior to the outbreak of Covid-19, retail sales of consumer goods and services were growing by around 10% per year. Meanwhile, revenue in the first 11 months of 2021 fell 8.7% compared to the same period in 2020.

Low purchasing power is the reason that commodity prices have skyrocketed, but the CPI has only risen moderately.

In 2021, the CPI (consumer price index) rose 1.84% from the previous year, the smallest increase since 2016.

Therefore, economists stressed that Vietnam must immediately implement measures to stimulate demand in order to revive the economy.

Responding to questions from deputies of the National Assembly on November 11, 2021 on the draft economic recovery plan, the Minister of Planning and Investment Nguyen Chi Dung said it was necessary to learn the lessons of a plan similar in 2008 and 2009 and not to repeat the same mistakes.

Dung said the package successfully helped the economy overcome the crisis and achieve a positive growth rate at the time, but also had serious consequences. The inflation rate was very high, 9.2% in 2010 and 18.6% in 2011.

“The package aimed to stimulate investment, production and social security. However, due to the lack of harmony between fiscal and monetary policies, the money did not go to production but to real estate and securities, which led to high inflation and uncertainties, ”he said. he declared.

Tran Thi Van, Member of the National Assembly of Bac Ninh Province, also said there was a need to learn lessons from the 4% interest rate support program worth $ 1 billion. dollars in 2009 which caused bad debts to the banking system.

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