Vietnam CPI forecast to peak in Q3

With a possibility of the large adjustment of electricity price lift, VCSC views that the CPI may peak 18-19% YoY in the third quarter from our previous forecast of 16-17%YoY before gradually declining towards the yearend.

With a possibility of the large adjustment of electricity price lift, Viet Capital Securities Company (VCSC) views that the CPI may peak 18-19% YoY in the third quarter from our previous forecast of 16-17%YoY before gradually declining towards the yearend.

The Government signed a decision to adjust electricity prices under market mechanism, effective from 1st June, following by a 15.3% increase in electricity prices to 1,242 per Kwh a little more than a month ago.

According to the Ministry of Finance, the most recent adjustment was insufficient to fully adjust to market rates, and therefore, the electricity price may likely be increased by some 40% by June. Should this happen, the electricity price adjustment could directly add 1% to the CPI growth this year.

The indirect effect of a possible electricity price hike on the CPI would be potentially larger as electricity is an input cost in many goods and services. VCSC estimate that the government will adjust electricity price to end the use of stabilization funds to subsidise electricity prices.

What may follow the decision over electricity prices is that the government may allow coal and petrol prices to adjust to market mechanisms. Therefore, VCSC could expect significant increases in international petrol and coal prices to be reflected in domestic prices. – VCSC

Tags: Vietnam CPI, Vietnam CPI 2011, Vietnam economic, Vietnam economy

Posted by VBN on Apr 19 2011. Filed under Consumer price index, Economy News. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry