VietNamNet Bridge - The nation's inflation is expected to ease to a rate of 1.8-2 per cent in May following April's one-month surge of nearly 4 per cent, says a domestic market management team.

April's consumer price index (CPI) rose by 3.32 per cent over March, the highest rate of increase since May 2008. April's figures pushed the nation's inflation in the first four months of this year to 9.64 per cent, outpacing targets set for the entire year.

Inflation would continue to be high for the foreseeable future due to the impact of economic and policy factors on the domestic economy, including the deregulation of electricity rates (slated to begin fluctuating under free market rules starting in June) and a minimum wage increase in May, said former State Bank of Viet Nam Governor Cao Sy Kiem.

The current bout of high inflation was ignited when the Viet Nam dong was devalued by 9.3 per cent against the US dollar in February, followed by hikes in petrol costs and electricity rates in March. Inflation was also spreading globally, especially in Asia, exerting great pressure on the Vietnamese economy.

The Ministry of Industry and Trade has vowed, however, to hold the line on the prices of food staples, saying that the domestic rice price would not increase further due to ample supplies in the south and a plan to add to stockpiles. The price of pork was also not expected to rise further due to an already high price, the ministry said.

Both Viet Nam Banking Association general secretary Duong Thu Huong and National Advisory Council for Financial and Monetary Policies member Tran Hoang Ngan have said that the Government's timely adoption of Resolution 11 has prevented inflation from getting worse.They stressed the consistently tighter monetary policies to avoid reigniting pressures that could result in a double-digit inflation rate at the end of the year.

"If the Government is resolved to pursue tighter monetary policies between now and the third quarter, inflation could begin to ease by the end of the third quarter or early in the fourth quarter," said Fulbright Economics Teaching Programme director Vu Thanh Tu Anh.

The Asian Development Bank (ADB) and the British bank Barclays have shared a gloomier view of Viet Nam ‘s economy, however, saying that inflation over the next several months could continue to increase beyond prices now 13 to 14 per cent higher than in the same period last year.

The ADB forecast that the country's inflation could stand at over 13 per cent by year's end while Barclays put the figure at closer to 15 per cent.

Short-term measures, including exchange rate adjustments, reform of the foreign exchange market and a cut in public expenditures were only the beginning of the effort to bring inflation under control, stressing the need for consistent long-term measures to include economic restructuring.

Source: VNS