Vietnam’s inflation may be up to 21-22pct by mid 2011: Barclays Capital says

In the report released by Barclays Capital, the author Prakriti Sofat forecasted Vietnam’s inflation would hit the peak at 21-22 percent by the middle of this year.

“Suppose the prices of basic goods in the world continue to increase and Vietnamese government’s decision on increasing the basic salary takes effect, we predict the inflation would be at 21-22 percent by the middle of 2011. We believe the price increasing pressure would be lessened by the end of 2011 thanks to the actual impacts of tightening credit policy” Barclays Capital said.

Barclays Capital also raised the forecast on Vietnam’s inflation in 2011 to 17.5 percent from 15 percent as forecasted previously.

With the evolution of inflation, Barclays Capital expected State Bank of Vietnam (SBV) would raise the repo interest rate (on the open market operations-OMO) by more 100 percent points (1 percent) from the current of 13 percent to 14 percent in May.

Saying about dong/US dollar forex rate, Barclays Capital predicted the local greenback will maintain the stability in a short term and Barclays Capital expected the local banknote will not be further devalued.

Barclays Capital believed in Vietnamese government’s strict policies such as more strictly controlling US dollar lending activities, restoring the US dollar transaction order in unofficial market as well as policies to increase the value of the local banknote.

Vietnam’s central bank decided to raise the compulsory reserve ratio in foreign currencies from 4 percent to 6 percent and lower the saving rate in foreign currencies for individuals to maximum 3 percent per annum and it is 1 percent pa for institutions. This will encourage people to choose savings in dong to enjoy more favorable deposit rate, Barclays Capital’s report said. – Vietbiz24

Tags: Vietnam 2011 inflation, Vietnam economic, Vietnam economy, Vietnam inflation