Record high fuel prices of nearly VND30,000 (US$1.31) per liter are putting upward pressure on prices of other essential commodities, for which measures are needed to stabilize the market and put inflation under control.

Transport businesses have been under huge pressure from high petrol products. Photo: Gia Minh

A quick survey conducted by The Hanoi Times’ reporter revealed food prices in traditional markets have been more expensive for the past few days.

For example, prices of vegetables rose by VND10,000-15,000 per kilogram. Similarly, chicken eggs, oil, sugar, shrimps, or processed food also saw prices going up by 10-30% against last month.

“Food prices nearly doubled compared to late 2021, including beef by 25%, and vegetable by 40-50%. But we are trying to keep price hike at around 15% to avoid losing customers,” Cao Van Dung, owner of a Pho restaurant in Nguyen Hong Street, told The Hanoi Times.

Meanwhile, prices of construction materials such as cement, steel, and iron also surged in March as a result of the rising cost of input materials such as fuels or coal.

A report from the Vietnam Steel Association (VSA) expected prices of steel in the local market would increase by 15-20% this year, given the high demand for the products and high prices of input materials.

Fertilizers, another key commodity, also saw prices going high in the past days, with prices of urea Ca Mau and urea Phu My increasing by VND200 per kilogram on March 17 against the previous week to VND18,000 per kilogram, or Urea Ha Bac by VND250 to VND16,000 per kilogram.

Overall, prices of fertilizer products went up by 5-8% compared to February and marked the third hike in prices since Tet.

Rising fuel prices have directly impacted the transport sectors, for which businesses are forced to adjust ticket fares to cover the costs.

Ride-hailing firm Grab on March 10 announced higher service fees citing rising fuel prices as the main reason. The firm’s latest decision resulted in an increase in fares of Grabcar 4 in Ho Chi Minh City and Hanoi by VND2,000 to VND29,000 for the first two kilometers, and VND10,000 for the next one; and Grabcar 7 to VND34,000 for the first two kilometers, and VND13,000 for the subsequent one.

A Grab spokesperson said the fares do not include other service fees, and would be subject to further changes in case of high demands.

Restaurants may opt to raise prices. Photo: Hai Linh

Measures to contain inflation

Economists said the high fuel prices have impacted businesses’ operations and forced them to increase their product prices to cover rising expenses.

Transport expert Bui Danh Lien added many companies are operating at a loss, and the situation only worsens if they do not increase the fares. “But in that case, transport companies would risk losing customers as they are also struggling with the Covid-19 impacts,” he told The Hanoi Times.

“For taxi and inter-provincial transport businesses, they are unable to raise the prices immediately, due to the administrative procedures and internal processes, but the fuel prices are going up every day. The worst thing is that the transport sector is operating at around  30% of the capacity,” Lien added.

With rising transport fees impacting the prices of consumer goods, there has been growing concern over the high inflationary pressure.

A representative of the Lotte Mart Vietnam said the retailer is negotiating with suppliers to keep the prices unchanged as long as possible but fears the effort may not last long as price pressures continue to mount.

Former Director of the General Statistics Office Nguyen Bich Lam said fuel and gas remain a key input material for the majority of socio-economic activities, with a study suggesting fuel prices make up 3.52% of the total production cost of the economy.

“A 10% increase in fuel prices could lead to a Vietnam’s GDP declined by 0.5 percentage points,” Lam said.

According to Lam, rising fuel prices may neutralize the impacts from fiscal and tax policies that are aimed at stimulating consumption and containing inflation. This may call into question the country’s GDP growth target, causing losses in the state budget and rising inflation.

“Drawing lesson from the past economic crisis, containing inflation should be a key task for the Government to avoid severe consequences on the economy in the long term,” Lam said.