Vietnam’s inflation at 10.5pct in 2010, World Bank says

Vietnam’s inflation will likely be 10.5 percent in 2010, much higher than the target of 8 percent set by the Vietnamese National Assembly.

The forecast was given in the World Bank (WB)’s report at Consultative Group (CG-2010) meeting held on December 7.

WB’s report also showed that Vietnam’s inflation suddenly surged high than expected in October and November. In details, by the end of November, Vietnam’s inflation in Jan-November stood at nearly 9.6 percent. The annual inflation of food price climbed to 14.8 percent, marking the highest level as of April 2009.

Basing on the rule that Vietnam’s inflation often increases strongly during two last months of year till February of following year, WB predicted Vietnam’s inflation in 2010 would be 10.5 percent.

As for reason, WB said that the increase in price of goods and industrial products are still main reasons causing high inflation during recent years. The trade ratio against gross domestic product (GDP) was up to nearly 150 percent.

Additionally, the dong is under devaluation cycle while the world price of goods is increasing. These will be likely to cause direct impacts on the prices in the domestic market.

Till the end of November, the VN Index dropped 8.8 percent as of the beginning of this year, giving Vietnam’s stock market become one of the gloomiest stock markets in the region. The price of real estate sector increased slightly this year.

Generally, Vietnam always has higher inflation rate than neighbouring countries. For example, Vietnam’s average inflation in past decade was about 8.8 percent, higher than the figure of 2.7 percent of Thailand and 5.1 percent of Philippines.

“This showed that Vietnam’s policy goals somewhat focus rather growth goal than macroeconomy stability. Afterward, when having to face a higher inflation ratio than expected, the government will have to seek administrative mechanisms such as price control and price stabilisation fund establishment” WB said.

Foreign indirect investment (FII) sources reached only $128 million in 2009 and it was $600 million in first 11 months this year, much lower than nearly $6.2 billion in 2007.

Before these facts, WB suggested that Vietnam should have more market friendly policies to achieve price stabilisation target, including more uses of competitive and monetary policies.

Tags: Vietnam 2010 inflation, Vietnam economic, Vietnam economy, Vietnam inflation