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2. Overview
2.1 Inflation
Rising inflation has become a pressing concern of Viet Nam since its accession to the WTO at the end of
2006. The Consumer Price Index (CPI) began to rise at the beginning of 2007 and soared in the fourth
quarter of the year. At the end of 2007 the CPI was 12.63 percent higher than the end of 2006 and the
highest rate of inflation recorded in twelve years. Figure 2.1 shows that between January and June 2008,
the CPI increased by 20.34 percent. Food and foodstuff products experienced the highest price rises (food
products: 59.44 percent; foodstuff: 21.83 percent). Food and food supply services comprised 42.85
percent of the national CPI and were the primary drivers of the “price storm” occurring in the early months
of 2008 3 .
In July and August 2008 inflation appeared to be slowing. Food prices fell slightly and foodstuff prices
barely rose. The “means of transportation and postal service” category of goods and services increased by
9.07 percent in August, mainly due to a sharp increase in the retail petrol price. The projected inflation rate
for 2008 is between 25 and 27 percent, the highest in recent decades.
Figure 2.1: Consumer Price Index in the first 8 months of 2008 (December 2007 = 100%)
160
150
%
140
130
120
Food
Foodstuff
General
110
100
12/07 1/08 2/08 3/08 4/08 5/08 6/08 7/08 8/08
Source: General Statistics Office, 8/2008 (www.gso.gov.vn)
2.2 Food Production and Expenditure at the Household Level 4
Production. Food production can be divided into groups such as seed crops (rice, maize), starch crops
(potato, cassava), vegetables and fruits, livestock and aqua-products (fish, shrimp) 5 . Nationally, the average
value of food production at the household level is about 1.5 times the average value of food consumption.
This reflects the fact that Viet Nam is a major exporter of food products (rice, fish, shrimp).
VHLSS 2006 data show that on average a poor household earns a net value of VND two million from selling
food, lower than the VND 3.7 million earned by non-poor households. Sixty percent of the poor are net
food sellers (62 percent of the rural poor and 26 percent of the urban poor) compared to 41 percent of
the non-poor. Therefore a rise in food prices will benefit a greater proportion of the poor than the non-poor.
However in terms of absolute value and the share of expenditures on food price rises will impact the nonpoor
more than the poor. Unlike many other countries most rural poor households in Viet Nam are net food
3 General Statistics Office, www.gso.gov.vn
4 Comments and data from VHLSS 2006 quoted in this section are from the “Impacts of Rising Food Prices on Poverty and Welfare in Viet Nam” Discussion Paper
by Linh V and Paul Glewwe, June 2008.
5 The concept of “food” used in this section adapted from the Discussion Paper by Linh V and Paul Glewwe is a close equivalent to the Viet Namese concept of “food
and foodstuff”.
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