Double digit CPI to be biggest challenge for Vietnam: ANZ

CPI is forecast to continue to be double digit and the biggest challenge for Vietnam would be inflation rather than growth.
The recent implications of the world market on the domestic economy appear to greatly minimised, according to ANZ. GDP in Q3 reached 6.1pct year-on-year and growth has been found fairly slight in industrial sector, yet relatively rapid in others.

CPI saw a year-on-year increase of 22.4pct over the first nine months after hitting the peak of 23pct in August. The index is, therefore, expected to experience further decreases after three consecutive months.

Enormous pressure on foreign exchange rate due to strong demand for US dollar for gold importing The market and ANZ were taken by surprise by the central bank’s raising refinancing interest rate of one percentage point to 15pct that has been effective since October 10th, which is believed to more effectively curb inflation. ANZ presumed the inflation to hit the peak, yet maintain to be two digits in 2012.

Recently, the target credit and money supply growth rate for this year has been lowered to 15pct-17pct and 12pct from 20pct and 16pct earlier respectively, which would be in line with the goal to bring next year’s inflation rate to single digits.

Despite the dong/US dollar exchange rate stayed stable in September, there has still remained pressures due to soaring demand for the greenback for gold imports.

In the meantime, the weak financial connection to the G2′s economies together with their negligible investment portfolios in Vietnam has greatly prevented domestic growth from the global crisis. Hence, the foremost challenge facing Vietnam in the times to come would be inflation rather than growth.

GDP in Q3 saw an actual year-on-year upsurge of 6.1pct against the similar figure of 5.7pct in the previous quarter, yet was well below the average percentage of 6.8pct.

Industry sector made a slight growth of 7.3pct in comparison with 8.2pct in Q2 due to decelerating production growth while rapid growth was found in others particularly services sector.

GDP in Q3 made a year-on-year decline of 25.8pct. Production growth in level 1 (exploitation) and level 2 (processing) both witnessed a tumble whereas services sector experienced the reverse trend. Adjusted GDP decreased from 21.9pct in Q2 to 19.7pct in Q3.

Public investment in Q3 hiked 24.4pct year-on-year compared with the similar decline of 5.7pct in Q2. Both the central and local agencies boosted investment with the growth rate of 27.6pct and 23.3pct respectively.

Investment was found to shrink at the Ministry of Agriculture and Rural Development while expand at the others.

Budget deficit to hike in Q4 State budget deficit that was at 2.6pct of GDP with expenses and revenue both sharply falling to 24.4pct and 21.8pct of GDP respectively Q3 is forecast to hike in the ending quarter.

The indicator is set to stay well below 5pct of GDP in comparison with the 5.6pct in the previous year.

Registered FDI capital climbed 9.6pct year-on-year in Q3 while the preceding quarter saw a year-on-year decrease of 60.5pct. The total amount reached US $3.8 billion against US $2.4 billion in early Q2. FDI disbursement, meanwhile, experienced a decline for three consecutive quarters to 5.7pct or US $2.5billion.

It is estimated that around 60pct of the total registered FDI capital has flown to the industrial production sector as yet. Hongkong is presently the largest investor in Vietnam with the registered capital accounting for 34pct of the total, followed by Singapore with 16.8pct.

Net foreign capital has kept flowing out of Vietnam for the second consecutive months in September due to the global market instability. The outflow in Q3 is estimated to reach US $32.4 million while the inflow in Q2 was US $81.9 billion.

Exporting in Q3 climbed 41.5pct year-on-year with crude oil as the principal item. Rice and electronics exports witnessed a steep rise over the previous quarter whereas those of other items remained unchanged.

In terms of exporting markets, Asean, EU and China continue the key customers while exporting to the US has recently seen a decline.

Import in Q3 saw a year-on-year growth of 27.9pct with petroleum the leading item (53.8pct). Also, import prices experienced a considerable upsurge of 30.9pct particularly raw materials over the same period last year. – Vietbiz24.com

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