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Mar 12, 2020 / 08:36

Vietnam consumer prices predicted to continue downward trend in March

Food and medical items are seen as major factors driving up inflation rate in March.

Vietnam’s consumer price index (CPI) is predicted to continue the downward trend seen in the previous months with a decline of 0.38% month-on-month but still up 5.22% year-on-year, according to KB Securities’ report.

 

Meanwhile, inflation is estimated at an average of 5.68% year-on-year for the January – March period, stated the report.

With inflation above the State Bank of Vietnam (SBV)’s full-year target of 4%, it is expected monetary policy will remain tight in the near term and Vietnam will not resort to any strong easing as seen in other countries in the region.

Moreover, low credit growth has led to abundant liquidity conditions and the SBV, the country’s central bank, has been conducting open market operations to reduce liquidity for the past six weeks.

KB Securities said as prices of rice exports have increased by nearly 5% from the previous month, this will likely push domestic rice prices higher and lead to a 0.5% increase in the food price index for March.

The Covid-19 epidemic could put pressure on domestic pork prices in the second half of March in two important ways: (1) increased hoarding due to outbreak fears; and (2) stockpiling by traders for illegal smuggling to China.

Prices for medicine and health services is forecast to rise by 0.15% in March or at a similar pace seen in February amid increasing demand for medical treatment as new cases of Covid-19 infections have emerged.

The brokerage firm expected the government to continue focusing on preventing any further spread of Covid-19 epidemic and asking commercial banks to support affected businesses.

Meanwhile, resumption of China’s production activities should help the recovery of Vietnam’s manufacturing sector, but tourism, transportation, aviation and consumption will likely continue to suffer until the epidemic is fully contained.