CPI will increase this month following the hike in electricity tariffs and petroleum.— Photo An Hieu

Electricity prices will increase by 7.5 per cent to an average of VND1,622.05 per kilowatt (kWh) from March 16, following the Prime Minister's decision to hike them, while petrol prices rose on March 11 by VND1,600 a litre.

Lam said the hike would result in the CPI for the whole year increasing by 0.46 per cent.

The Government said it would ensure that the GDP growth rate this year is 6.2 per cent and inflation is curbed to 5 per cent.

However, economists are still worried about the impact of these increases on the economy.

Economist Le Dang Doanh said the rise could result in massive costs for businesses, thus creating a new increase in goods' prices in the future.

Doanh added that the fuel hike was acceptable as it followed similar price surges in the world market. However, the rise in electricity tariffs had created a monopolistic situation. The Government's requirements for increasing productivity, reducing staff and stemming losses in transmission had also not been clearly explained.

He added the 7.5 per cent increase was too high, and would exert additional burden on enterprises using electricity.

Doanh suggested that the rise should have been 3 per cent each, and should have been gradually increased and forecast to help enterprises actively plan their production.

A survey by the Vietnam News Agency showed that price augmentation would hurt the big power-consuming industries the most.

Truong Quoc Huy, General Director of the Vicem But Son Cement Joint Stock Company, said his firm used about 100 kWh of electricity to produce one tonne of cement. Since power prices for manufacturing were higher than those for households, the power price hike was likely to affect production costs and selling prices.

According to Chairman of the Vietnam Steel Association, Ho Nghia Dung, electricity expenses account for about 7 per cent of steel billet production costs. Between 400 and 600 kWh of power are needed to produce one tonne of steel billets.

He estimated that the 7.5 per cent hike would raise steel production expenses by 80,000 to 100,000 VND (US$3.75 to 4.68) per tonne, adding that it would also act as a burden for steel makers amidst the array of challenges they are already facing, such as, decreasing prices of steel billets imported from China and Japan.

Dao Phuong Mai, a teacher in Ha Noi's Hoang Mai District, expressed her worry about a price hike in the near future, which might force her to tighten spending.

"Before the Tet holiday, goods and other services' prices were not reduced despite petroleum selling prices decreasing. The prices have risen rapidly, even though the salaries have not," Mai noted.

"It feels like I was pick-pocketed while going to the market." — VNS