Rising gasoline prices further burden pandemic-hit economy

“I know customers will not like it, but I do not have any choice,” he said, explaining that the cost of ingredients and their delivery has risen by 20 percent due to rising gasoline prices.

Many transport companies have either announced or quietly increased prices by around 10 percent last week as the government hiked gasoline retail prices to mirror the increase in global prices. A Ho Chi Minh City transport firm, which asked not be identified, has raised container transport prices by 11 percent and now charges VND3.2 million ($141) for a trip to the neighboring province of Dong Nai.

Tran Duc Nghia, CEO of Delta International, said the transporter is set to hike prices by around 5 percent soon. Gasoline prices in Vietnam are now at an eight-year high, having risen by 11 percent in the last two months. Following the latest adjustment last Friday, the popular RON 95 variety is now close to a record high price.

Global crude prices have climbed to a seven-year high and Vietnam’s biggest refinery Nghi Son has been forced to reduce its production from 105 percent to 80 percent due to a cash crunch. Nguyen Bich Lam, former head of the General Statistics Office, estimates that a 10 percent increase in fuel prices causes GDP growth to drop by around 0.5 percentage points.

Lender HSBC last week raised its inflation forecast for Vietnam from 2.7 percent to 3 percent after factoring in the higher energy prices. The Asian Development Bank pegged the figure at 3.8 percent. Transport companies are between a rock and a hard place since price hikes are hard to sell in an economy hit by Covid-19.

Hai Van International Shipping in HCMC, which transports goods and passengers, has seen revenues fall by up to 70 percent year-on-year in recent weeks due to declining demand.

“We plan to increase fares, but we have yet to do that as there might be a decline in number of passengers.”

Another transport company, Minh Thanh Phat, said the higher fuel price is another blow that put many operators to the verge of bankruptcy amid low demand.

“Continuing to operate will result in losses, while suspending operations means we cannot pay loan interest to banks”.

Economist Ngo Tri Long urged the government to lower special consumption and environmental taxes on gasoline to reduce the pressure on the economy.