Inflation projected to drop to below 3 percent in 2017

Market research firm MarketIntello has forecast that Vietnam’s inflation may fall to below 3 percent, lower than the rate of 3.8 percent it predicted last month.
Inflation projected to drop to below 3 percent in 2017 ảnh 1The CPI decreased 0.53 percent in May compared with April, pushing inflation down to 3.19 percent, the lowest since September 2016. (Photo: VNA)

Hanoi (VNA) – Market research firm MarketIntellohas forecast that Vietnam’s inflation may fall to below 3 percent, lower thanthe rate of 3.8 percent it predicted last month.

According to the company’s latest macro-economy report,the inflation rate was trending downward because of falling prices of freshfoods as well as oil and petroleum products.

Data from the General Statistics Office show thatConsumer Price Index (CPI) decreased 0.53 percent in May compared with April, pushinginflation down to 3.19 percent, the lowest since September 2016.

Price sub-indices of foods and food services plunged tothe lowest in 16 years, indicating strong growth in supply and weakening demand.The main reason behind this is a price drop of pork causing by oversupply ofpigs and Chinese traders’ move to halt purchases.

The diplomatic crisis betweenQatar and other Gulf states has affected the recovery of global crude oilprices, indirectly affectingthe Vietnamese government's plan to exploit 1 million tonnes of oil. One of thegovernment’s short-term solutions to support economic growth is to pump out anadditional 1 million tonnes of crude oil, MarketIntello Managing Director DinhTuan Minh said.

The plan will work out well if crude oil prices rebound,otherwise the extra exploitation will lead to more losses, he added.

The market researcher kept its May projection of 6.1percent for the country’s economic growth this year.

Due to lower CPI, the interest rate will continue to inchdown, but the contraction should not be significant as the credit growth rateis higher than that of deposits. Nevertheless, against the pressure of risingUS interest rate, there may be some VND rate hikes from the State Bank of Vietnam(SBV) to protect the exchange rate level.

The exchange rate increased by 0.5 percent this year,lower than the previous forecast of 1.5-2 percent, thanks to Vietnam’s stabletrade balance, positive capital account and stronger foreign exchange reserves.-VNA
VNA

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