Viet Nam's headline inflation rate increased by 1.69 per cent in the first quarter of this year. — Photo ndh.vn

HA NOI (Biz Hub) — Viet Nam's headline inflation rate increased by 1.69 per cent in the first quarter of this year, putting pressure on the new Government to curb the rate going forward, according to a quarterly report on macroeconomic growth.

The report, conducted by a group of researchers from the Viet Nam Institute for Economic and Policy Research (VEPR), was discussed during a launching ceremony in Ha Noi on Tuesday. The Australian Government's Department of Foreign Affairs and Trade supported the research.

Viet Nam's inflation rate hike in the first three months of 2016 was attributed to increasing fees for medical services and education, and the recovery of commodity and service prices in the world.

New developments in the global economy, along with domestic changes, make it a difficult-to-forecast number, said Dr Nguyen Duc Thanh, VEPR director.

The figure is predicted to increase by 4 to 5 per cent throughout the year, following surging prices for energy and food due to the ongoing drought in Central Highlands and Mekong Delta provinces. In addition, medical service fees will continue to increase in July, and so will education costs when the new school year starts in September.

According to Truong Dinh Tuyen, former Minister of Commerce, pressure from inflation also comes from petrol prices, which are on the rise.

The report also showed that the national GDP in the first quarter increased by 5.46 per cent, down from 6.12 per cent growth compared to the same period last year. For the first time in five years, economic growth moved at a slower pace.

While service sector growth remained stable, the industry sector saw only 6.72 per cent growth, compared to 8.74 to 9.64 per cent over the last year.

The report also revealed that the agriculture sector experienced a difficult time from January to March as rice productivity in the Mekong Delta region and crop yields in the North diminished.

"Economic figures in the first quarter usually remain low," Thanh said, adding that economic policies towards macroeconomic stability in the long term should be encouraged instead of aiming at overhasty targets to achieve high growth from the beginning.

"What threatens the national economy the most is State overspending and rising public debts," senior economist Le Dang Doanh said.

He added that the private economic sector was showing weaknesses as a series of enterprises went bankrupt. In addition, recent free trade agreements will also contribute to economic growth, he said.

"We have a new Government, which will affect the national economy in the near future," he added.

There will be both "opportunities and challenges", he said, adding that drastic economic reforms are required.

In addition, former commerce minister Tuyen suggested restructuring of the economic sector to create conditions for long-term growth as well as to ensure sustainable development.

The report stated that despite challenges the economy faces, the research group expects conditions for economic growth to remain positive if the nation takes advantage of opportunities from free trade agreements and if administrative reform is boosted. — VNS