HANOI, May 8 (Xinhua) -- Vietnam lifted the retail electricity price for the first time since 2019, raising concerns over inflation. However, the Ministry of Finance said the hike would likely have a small impact on the country's consumer price index (CPI) in the short run, Vietnam News reported on Monday.
As the state-owned utility, Electricity Vietnam (EVN) raised the average retail electricity price by 3 percent, energy-consuming industries would be the hardest hit as higher electricity prices mean higher production costs, said the ministry, adding that steel, cement and paper companies may see their costs inching up 0.18 percent, 0.45 percent and 0.4 percent, respectively.
The electricity price hike would account for about 0.105 percent of the increase in the CPI while the increase of 5 percent would make Vietnam's CPI advance 0.175 percent, Mirae Asset securities forecast.
In the short term, a small price hike will not likely have a large impact on major industries as it is common practice for electricity producers to sign long-term contracts with EVN, with some up to 25 years, the securities company said.
Given the fact that EVN made losses of 36.29 trillion dong (1.5 billion dollars) last year due to a year-on-year increase of 9.27 percent in electricity production costs, the 3-percent price hike should be seen as moderate, said Nguyen Tien Thoa, president of the Vietnam Valuation Association.
A 3-percent price hike in electricity might result in as much as a 1.099 percent rise in CPI in the short term and a 1.28 percent rise in the long term, he said.
Vietnam's CPI in the first four months this year rose 3.84 percent from a year before due to higher school fees and housing costs as well as more expensive food prices, according to the General Statistics Office.
The statistics authorities also said core inflation, excluding more volatile food, energy, and other public services prices, jumped 4.9 percent in the period from a year ago.
Vietnam is trying to keep its CPI close to the target of 4.5 percent for the year. ■