Production chain at the Kien Giang Import & Export Joint Stock Company in Kien Giang province.(Source: VNA)Hanoi (VNA) - Research findings by the VietnamInstitute for Economic and Policy Research (VEPR) show that Vietnam’s economicgrowth in the third quarter was the highest in seven years, though overallinflation also started inching up in August and continued throughout Septemberafter a sharp decline since the start of the year.
According to Nguyen Duc Thanh, VEPRdirector, quarterly growth for the third quarter gross domestic production was7.46 percent, an improvement of 0.27 percentage points from the secondquarter, with a forecast of 7.12 percent for the fourth quarter, bringing theexpected annual growth rate to 6.64 percent.
In particular, agricultural and servicesectors have improved their performance, with construction and manufacturingindustries growing 12.77 percent quarter on quarter. Other industrialproductivity indicators were also positive.
In the fourth quarter, consumer demandand investment demand is expected to increase sharply as the pace of constructioninvestment disbursement is accelerated. At the same time, exports will likelycontinue to rise sharply due to favourable developments in the world economy,as well as global trade growth.
Third quarter consumer price index(CPI) growth has increased from 2.52 percent in July to 3.4 percent inSeptember. This can be attributed to 20 provinces increasing their overallhealth care service fees for patients without insurance by 58.08 percent inSeptember.
Furthermore, 46 provinces and citiesincreased tuition fees in August and September, which in turn pushed theeducation sector’s price index up 7.92 percent in September compared to thesame period in 2016.
The transportation price index has alsoincreased after the adjustment of gasoline prices in the third quarter, withgrowth rates of 5.7 percent and 6.7 percent in August and September,respectively.
With food price recovery, credit growthand disbursement pressure, as well as upward adjustment in electricity andpublic service prices, the fourth quarter inflation rate will mostly likelyincrease to 4.16 percent, exceeding the annual target rate of 4 percent.
VEPR research also indicates that aPrime Ministerial decision allowing Electricity of Vietnam (EVN) to adjust theaverage electricity retail price from 3 to 5 percent based on objectiveprice fluctuations may also create further inflationary pressure.
Another indicator also reinforces theview that inflation will increase, said Thanh, mentioning that while thetargeted annual credit growth is 21 percent to ensure an annual overall growthrate of 6.7 percent, up until the third quarter, actual credit growth wasaround 10 percent.
Thus, the credit growth rate will needto increase 10 percent in the fourth quarter to meet the Government’s plannedgrowth rate. This is equivalent to an infusion of around 200 trillion VND (8.88billion USD) into the economy, which poses a threat not only to inflation butalso hints at non-performing loans in the future.
On the other hand, core inflation hasdropped slightly against the second quarter to 1.32 percent, widening the gapto full inflation and reflecting the State Bank of Vietnam’s policy of prudentmoney supply.-VNA
VNA
