Vietnam’s inflation is forecast to hit 8 per cent this year and 8.3 per cent next year due to higher prices of energy, foodstuff and a weaker dong, Standard & Chartered’s newly-released report said.
Vietnam’s economy will continue to grow at a healthy rate at 8.3 per cent in the first nine months, and now the government of Vietnam is adopting measures to boost its GDP growth rate to the expected 8.5 per cent this year by expanding exports, attracting more foreign investments.
“Although we believe it is reasonable to expect Vietnam’s economy to expand by 6 per cent-8 per cent in medium term, allowing inflation to stray is a risky strategy that could undermine the long-term balance of the economy,” wrote Tai Hui, an economist of Standard & Chartered.
“We expect this trend to continue in the coming quarters given strong import demand from consumers and manufacturers,” he said.
While a GDP breakdown by expenditure was not immediately available, the bank believes much of the economic growth seen so far this year came from domestic factors.
Exports expanded by 19 per cent on-year in the third quarter, however, the trade deficit reached $3 billion, doubling that last year due to the country’s growing imports of machinery, equipment and input materials including refined petroleum products.
Between January and September, consumer goods prices rose 7.32 per cent from last December, of which prices of foods surged 12.18 per cent, housing and construction materials 9.66 per cent, and other goods below 6 per cent, according to GSO statistics.
Total retail sales grew by an average 23.6 per cent during June and August, the report said.
The country attracted $9.6 billion of FDI during the time, up 38 per cent on year, and expects $10 billion this year, it noted.
Despite the hefty inflationary pressure, the government of Vietnam has set an ambitious growth target of more than 9 per cent next year in order to achieve its $1,000 GDP per capita target. This could prompt even greater inflation risk to local economy, analysts wrote. (Young People, VNS)
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