Inflation this year will fluctuate at about 3 percent due to adjustments in public services, taxes and fees, the Vietnam Institute for Economic and Policy Research (VEPR) has forecast.

If no price hike is seen in public services, such as health care and education, environment protection taxes and road fees, the inflation rate will be about 1 percent, the institute says in its latest report.

The report further says that prices of basic commodities are likely to continue to decrease from now until the end of the year, however, a significant change in oil prices will put pressure on inflation.

As for foreign exchange rates, the report forecasts that the central bank could adjust the dollar/dong exchange rate up 2 percent, as planned this year. The adjustment, if it is taken, will be in the final quarter of this year. In January 2015, the State Bank of Vietnam devalued the dong by 1 percent, from 21,246 VND to 21,458 VND per US dollar, which was the first exchange rate adjustment since June 2013.

The report projects that Vietnam's economic growth this year will be 6.3 percent if oil prices average roughly 60 USD per barrel throughout the year.

Lower oil prices, however, may cause a State budget deficit higher than expected, the report says, estimating that this year's budget deficit will be roughly 45 trillion VND (2.08 billion USD), or roughly 6-6.5 percent of GDP if oil prices average 60 USD per barrel.

Such a deficit will force the Government to cut investment spending this year, the same as in 2014, VEPR warns.

It also forecasts that the country will have a trade deficit this year, after three consecutive years of trade surpluses, however, the overall balance will remain as a surplus thanks to an offset from foreign direct investment (FDI) capital and overseas remittance flows.

Also in the report, the institute has recommended the Government make a breakthrough in its policy reforms and actively create favourable conditions for private enterprises.

New policies should be mapped out to create a fair investment environment for all economic sectors, it says.-VNA