Dec 05, 2019 / 10:46

Pork prices to make huge impact on Vietnam’s CPI in 2020

Vietnam’s inflation in 2020 is forecast to hit 3.5%, higher than the government’s estimated 3.17 – 3.41% in 2019, while the pressure will build up right at the beginning of next year.

Pork prices are forecast to play a decisive role in Vietnam’s inflation performance in 2020, according to Viet Dragon Securities Company (VDSC).

Since the mid of 2019, pork prices have surged and the recent hikes actually brought inflation upward.

 

Excluding most of state-controlled prices/fees, core inflation has taken for the upside since the second quarter of 2018 as the spillover effect of rising electricity and pork prices is having an impact. Especially in the last quarter of 2019, those prices are estimated to expand 1.9% year-on-year. Theoretically, it is tough to tackle rising core inflation, stated VDSC.

In November, pork prices have risen by over 50% year-to-date and fluctuated around VND65,000 (US$2.81) per kilogram, while the spread of African swine fever (ASF) has caused a huge drop in pork supply and forced the government to ramp up pork imports.

Given assumption of over VND60,000 (US$2.6) per kilogram for live hog and US$60-65 per barrel for Brent crude oil, VDSC’s base case of 2020 inflation is 3.5% and the pressure will build up right at the beginning of next year.

 

2019 is a comfortable year in term of headline inflation whose annual growth is estimated at 2.7% year-on-year, lower than the last two years of 3.5%. In general, the government succeeded in constraining the upside risk of inflation via significantly controlling state-controlled prices/fees, especially health care costs.

Comparing inflation breakdown in 2017-2019, it is clear that the healthcare subgroup has made less and less contribution to the headline inflation due to administrative actions. Its role has been replaced by the rise of foodstuff, while the proportion of transport and tuition remained unchanged.