(AFP) – Feb 12, 2008

HANOI (AFP) — Vietnam's rapid economic growth has earned the country international plaudits, but at a Hanoi street market most people complain that it is becoming harder every month to make ends meet.

The reason for the sour mood is rampant inflation, especially in food prices, which in January surged by 22 percent year-on-year.

Consumer prices overall spiralled upwards by more than 14 percent, the largest rise since 1995, according to the state-run General Statistics Office, in an increase that has outpaced wage rises and hit the poor the hardest.

"I have to get by on a modest salary," said teacher Nguyen Thi Lien, 40, pointing with dismay at a butcher's stand where a kilogramme (2.2 pounds) of pork has gone to 80,000 dong (five dollars) from 50,000 (three dollars) in just two months.

"These steep price increases really affect my family spending," she said. "Now I have to think carefully about what to buy when I go shopping."

Le Thi Man, a 31-year-old accountant, said her family of five has skipped the habit of starting the day with a streetside bowl of pho noodle soup.

"One bowl of pho a few months ago cost 10,000 dong," she said. "Now it's 15,000. Some places charge 20,000 or even 40,000 dong. Now I cook at home instead. I've just bought a box of instant noodles."

Jonathan Pincus, the UN Development Programme's chief economist in Vietnam, said: "The problem is serious because of the very large part that food makes up in the budgets of poor people in Vietnam.

"It's probably forcing some people back into poverty."

Communist-ruled Vietnam -- a World Trade Organisation member for the past year -- aims to run a "market economy with socialist orientation" and is especially sensitive to public anger over rising prices.

The spiralling costs of food, petrol and other basic goods have fuelled labour unrest, mostly among workers at Taiwanese and South Korean textile and shoe factories around southern Ho Chi Minh City.

In the year's first 20 days, more than 25,000 workers went on strike at nearly 40 plants demanding better pay and conditions, said the Saigon Times.

Vietnam has in some ways become the victim of its own success.

Optimism about the nascent "tiger economy" that grew at 8.5 percent last year has fuelled foreign investment -- with 20 billion dollars more pledged last year -- a cash influx that has driven up prices.

As state enterprises have part-privatised, a stock market boom had fuelled urban wealth before declining in recent months. Investors then shifted their money into gold and real estate, sending property prices skyrocketing.

The boom has also fuelled bank lending, which grew by over one-third last year, leading the government to raise the reserves that banks must keep, and to hike interest rates to slow credit growth and cool the economy.

The galloping prices have also been driven by high world energy prices, which the government now passes on to consumers at the pump, and the stronger yuan in neighbouring China, from where Vietnam imports many goods.

High food prices worldwide have been blamed in part on higher biofuel and livestock production, trends which reduce the land area available for crops.

"Vietnam has liberalised its rice market, which means the domestic price follows the international price," said Pincus.

"The government is now finding that this is risky because, unlike Indonesia and Malaysia, it does not have any buffer stocks for when prices go up."

In Vietnam, food prices have also been driven up by a series of typhoons that battered farms last summer, and animal health disease outbreaks such as blue-ear pig disease and bird flu in poultry, said Pincus.

For rice, the UN economist said: "The main factor is the increase in energy prices. Nitrogen fertiliser is a major input. It is a byproduct of gas production, so as energy prices go up, the cost of rice goes up."

The other major inputs -- labour and land -- are becoming more expensive too, he said, as hired workers demand more money in the Mekong delta, Vietnam's rice basket, and more rice paddies are being turned into factory land.

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