Vietnam inflation predicted to rise to 3.5% in 2021

Vietnam’s economy with high level of openness could be susceptible to rising inflation as a result of growing global commodity prices.

Rising global commodity prices could lead to the return of inflation in Vietnam with an estimated rate of 3.5% year-on-year in 2021, 0.3 percentage points higher than the 3.2% inflation rate last year, but remains below the 4% target set by the National Assembly, according to Viet Dragon Securities Company (VDSC).

However, given the Vietnamese government’s cautious approach in keeping inflation rate under control, it is likely that local authorities would “use appropriate measures to mitigate inflation risks, including tightening monetary policy,” stated the VDSC in a report.

Surge of global commodity prices

Since November 2020, Brent oil prices have been climbing steadily from US$39/barrel to US$56/barrel.

“There are some positive drivers for this bullish movement,” noted VDSC.

On the supply side, OPEC and its ally’s production cuts are expected to remain in place while US shale growth will be contained under the new Biden administration. Meanwhile, on the demand side, although oil demand has not recovered to pre-Covid levels, demand growth is building up and is expected to outpace supply growth. In addition, factors like low interest rates, continued fiscal stimulus spending and a weak US dollar are also attributed to an increase in oil prices.

Other commodity prices have been higher than at the start of 2020. For example, iron ore prices rose sharply in 2020 and are currently 86% higher than at the start of 2020, supported by lingering supply concerns and strong manufacturing activities in China.

Copper prices were also up 27% compared to levels at the start of 2020. The Baltic dry index, which tracks rates for capesize, panamax and supramax vessels, was up by about 8% year-to-date, and 35% higher than at the start of 2020, reflecting the recovery of global trade. The Bloomberg Commodity Index is also back to pre-Covid level, closing at 80 as of January 28, 2021.

 

Rising inflationary pressure

In 2020, Vietnam’s consumer price index (CPI), a gauge of inflation, rose 3.2% against the previous year, which was below the target of 4.0% set by the government. The increase in CPI was primarily driven by rising food prices, which was up 3.5% year-on-year in 2020.

 Customers shopping at Big C Thang Long. Photo: Thanh Hai

However, the inflation rate has fallen gradually since the start of 2020 thanks to a steep decline in fuel prices. Furthermore, the government’s support (i.e. lowering electricity prices) and decreasing demand for tourism also helped to keep inflation in check.

In January, inflation remained subdued as the CPI fell by almost 1.0% year-on-year. Falling inflation was mainly attributed to softer food and low fuel prices compared to the same period of last year. However, on a monthly basis, the CPI rose by nearly 0.1% compared to last December.

Prices of domestic fuels (petrol & gas) rose following global oil prices. The transport inflation index rose by 2.3% month-on-month, a second consecutive increase. In addition, as the Tet holiday is coming, consumer demand also increased, the food inflation index increased by 0.6% month-on-month, while the textile inflation index was up by 0.4%.

“It is important to note that the upward trend of prices was restrained by continued reduction in electricity costs and the use of petrol price stabilization fund,” stated the VDSC.

Prices of housing and construction materials dropped by 2.3% month-on-month due to the second support package from EVN (Electricity Vietnam), triggering a 16.9% decline in retail electricity prices. As of January 22, global petrol prices were up about 7.0% while domestic petrol prices only rose by 2.8% compared to the start of 2021.

Hanoitimes

4% inflation target set for 2021 within reach: experts

4% inflation target set for 2021 within reach: experts

Vietnam is likely to meet its target of reining in inflation at a rate of below 4% in 2021, although experts warn that unfavourable factors could impact market fluctuations.

 
 

Other News

.
Natural island estate attracts foreign investors
Natural island estate attracts foreign investors
BUSINESSicon  05/05/2021 

Not only attracting domestic customers, residential areas on natural islands also attract overseas Vietnamese and foreign investors thanks to convenient, classy and private ecological living spaces.

Development of agri-food sector needs untying knots in mechanisms
Development of agri-food sector needs untying knots in mechanisms
BUSINESSicon  04/05/2021 

The agri-food industry has been maintaining high resistance to the Covid-19 pandemic, with the potential to boost economic recovery. It posted a growth of 4 percent in 2020, equivalent to a gross domestic product (GDP) contribution of US$3.7 billion.

Some 430 businesses leave market every day in Jan-Apr
Some 430 businesses leave market every day in Jan-Apr
BUSINESSicon  04/05/2021 

Some 430 businesses left the market, while only 368 new businesses were established on a daily basis from January to April 2021, according to the Ministry of Planning and Investment.

European businesses’ confidence on Vietnam outlook reaches highest since Covid-19 emergence
European businesses’ confidence on Vietnam outlook reaches highest since Covid-19 emergence
BUSINESSicon  04/05/2021 

Vietnam is on the right path to achieving its twin goals of protecting health and promoting economic growth, stated Chairman of the European Chamber of Commerce in Vietnam (EuroCham).

'Nature - based' farming a winner in Mekong Delta
'Nature - based' farming a winner in Mekong Delta
BUSINESSicon  04/05/2021 

All of the delta’s 12 provinces and its major city, Can Tho, have been able to turn more unproductive rice fields into fruit tree and other crop...

Vietnam Airlines reports losses of nearly VND5 trillion in Q1
Vietnam Airlines reports losses of nearly VND5 trillion in Q1
BUSINESSicon  04/05/2021 

Vietnam Airlines incurred after-tax losses of nearly VND5 trillion in the first quarter of this year, surging over 90% year-on-year and the highest-ever losses recorded for a quarter, as the COVID-19 pandemic is emerging increasingly complicated.

The secret of mutant orchids selling for billions of VND
The secret of mutant orchids selling for billions of VND
FEATUREicon  04/05/2021 

Mat Nai (baby eyes), Gai Nhay (dancing girl), Hien Oanh, Ngoc Son Cuoc, Bao Duy, Bach Tuyet (Snow White), Buom Dai Ngan (jungle butterfly) and Hong Yen Thuy are some of the names given to mutant orchids. Some of them have sky-high prices.

Coolcat trading floor collapses, more than VND200 billion vanishes
Coolcat trading floor collapses, more than VND200 billion vanishes
FEATUREicon  04/05/2021 

Investors, from freelancers in Hanoi to sale officers in HCM City, have poured several million VND to several hundreds of million dong into Coolcat. About VND200 billion (nearly US$9 million) is likely to disappear.

It needs objective remarks for rice export decline
It needs objective remarks for rice export decline
BUSINESSicon  02/05/2021 

There are different remarks over the good harvest and export prices of rice in the Mekong Delta but the strong decline in rice export volume.

Vietnam’s digital economy to hit 52 billion USD by 2025
Vietnam’s digital economy to hit 52 billion USD by 2025
BUSINESSicon  02/05/2021 

Vietnam’s digital economy will likely reach 52 billion USD in value by 2025, according to the e-Conomy SEA 2019 report by Google, Temasek and Bain & Company.

Multiple financial risks still challenge Vietnam
Multiple financial risks still challenge Vietnam
BUSINESSicon  02/05/2021 

Global financial markets have been negatively hit and significantly shaken by the ongoing unpredictable, relentless and complicated developments under the Covid-19 pandemic, leading to continued global financial instability.

Foreign partners help to lay foundations for Vietnam’s rise
Foreign partners help to lay foundations for Vietnam’s rise
BUSINESSicon  02/05/2021 

In the 46 years since national reunification, Vietnam’s development has witnessed great strides with major contributions from foreign investment, which has been targeted to continue being an important driver of the domestic economy.

Development of supporting industry for automobiles awaits breakthrough policies
Development of supporting industry for automobiles awaits breakthrough policies
BUSINESSicon  02/05/2021 

Automobile sales in Vietnam are forecast to reach 1 million units a year by 2025, opening up substantial opportunities for businesses to develop a supporting industry for the sector.

Local steelmakers red hot on investment
Local steelmakers red hot on investment
BUSINESSicon  02/05/2021 

Over recent months, the steel market has retained positive momentum after its recovery in mid-2020, helping many steel producers record a strong performance in the first quarter of 2021.

Index results spark reforms in Vietnamese metropolises
Index results spark reforms in Vietnamese metropolises
BUSINESSicon  01/05/2021 

Despite strong efforts, major cities like Hanoi and Ho Chi Minh City are still lagging behind in the 2020 Provincial Competitiveness Index, triggering concerns over the efficacy of their reforms.

VIETNAM BUSINESS NEWS APRIL 30
VIETNAM BUSINESS NEWS APRIL 30
BUSINESSicon  30/04/2021 

Central province debuts first Ngoc Linh ginseng plant

Association calls for national gold exchange
Association calls for national gold exchange
BUSINESSicon  30/04/2021 

The Vietnam Gold Trading Association (VGTA) has proposed the establishment of a national gold exchange in Hanoi or Ho Chi Minh City.

Restaurant chains fall into crisis amid pandemic
Restaurant chains fall into crisis amid pandemic
FEATUREicon  30/04/2021 

The Tokyo Deli Restaurant on Nguy Nhu Kon Tum Street in Hanoi closed its doors two months ago for the Tet holiday, but it has now decided to never open again. The long Covid-19 pandemic has hit many restaurants hard.

Amid 'land fever', Can Gio district prohibits civil servants from working as land brokers
Amid 'land fever', Can Gio district prohibits civil servants from working as land brokers
FEATUREicon  30/04/2021 

Land prices in the HCM City suburban district of Can Gio have been soaring following the news that Can Gio will become an inner city district, or a city in the future. The local authorities have prohibited civil servants from acting as land brokers.

Vietnam’s potential to drive agri-food recovery ranks second highest in the region
Vietnam’s potential to drive agri-food recovery ranks second highest in the region
BUSINESSicon  01/05/2021 

As a key pillar of the national economy, Vietnam’s agri-food sector remained resilient during the COVID-19 pandemic and has great potential to drive economic recovery, ranking second in the region.

 
 
 
Leave your comment on an article

OR QUICK LOGIN