The CPI dropped from 1.96 percent in February to 0.14 percent in April – a 12-month record low. Catering and post and telecommunications were two groups that witnessed sharp decrease while housing and construction materials continued to rise in price.

Price fluctuations in April made the CPI more difficult to forecast. The increase in consumer demand during the celebrations of Liberation Day and May Day and the government’s decision to raise the minimum salary may push up the CPI in May and in the following months.

Moreover, a long-term problem that has seriously affected the CPI over the last ten years is the trade deficit. Economists have shown the relation between the trade gap and inflation in the 2004-2007 and 2007-2008 periods, when the inflation rose to 19 percent and the trade gap and trade deficit was equivalent to 29 percent of export turnover.

In the context of global integration, the export turnover accounts for 60-70 percent of the GDP. However, Vietnam has to import more machinery and materials and this is one of the direct factors in affecting the price of domestic products.

Developed economies like Singapore have to import a lot, even drinking water, but the products they export are of high value, which helps to counterbalance inflation.

However, the value of Vietnam’s staple exports is limited. For example, the country exports US$1 billion worth of textiles and garments but imports up to US$700 million worth of materials to manufacture these products. This high dependence on imported raw materials has increased the risk of a trade deficit and an ‘imported’ inflation.

In the first quarter of 2010, Vietnam had a trade deficit of US$4.6 billion or 23 percent of the country’s revenues from exports. Meanwhile, the government had set a target of restricting the trade deficit level to no more than 20 percent of export turnover.

All this has required a restructuring of domestic production and the development of support industries.

Last April, the government issued Resolution No 18 on solutions to stabilize the macro-economy and achieve an economic growth rate of 6.5 percent in 2010. These solutions include curbing inflation, boosting exports, reducing trade deficit, stabilizing the financial and banking system, and stepping up the information and communications campaign to create a consensus in society.

As a result, the CPI in April rose only 0.14 percent over the same month last year but 4.27 percent compared to last December.