Vietnam inflation may have reached its peak: analysts

Starting from a low base of 1.42% in February last year, the Consumer Price Index (CPI) rose 4.89% last month.

Core inflation, which measures the long run trend in price level, increased 5.21% year-on-year. Pham The Anh, a lecturer at the National Economics University, said that inflation may have peaked in January and that it will start to decline this month, gradually dropping to 3-3.5%.

Vietnam’s CPI last year reached 3.15%, much lower than the average of 7.85% in Southeast Asia, while developed countries in other parts of the world recorded double-digit figures.

Analysts have said that this year inflation will transition from developed countries to developing ones, and that as some developed countries have reached inflation peaks, developing countries are now looking for their peaks.

ACB Securities analysts said that there will not be a surge in inflation at least in the first half of this year, and they forecast that the government will succeed in controlling inflation within the 3-4.5% range. The government goal is to keep inflation below 4.5% this year.

A weakened demand is one reason for the lower forecast. Revenues from retail and services in January was only 88.1% of pre-Covid figures, even though it has risen 15.8% year-on-year, according to the General Statistics Office.

The decline in stocks, bonds, and property prices also dragged down consumption, while the high interest rates have encouraged people to save and cut spending, Anh said.

There is lack of data to predict consumer trends in the upcoming months; HSBC and SSI both agreed that they would need to wait for February data to make a forecast.

Another factor that holds inflation from surging is a slower growth in Vietnam’s money supply, which rose less than 4% last year, a plunge from the 11-15% recorded in previous years.

Anh said that currency will not have a major impact on inflation now. Global prices of commodities are believed to have peaked and are now on a downward trend.

OPEC countries expect to reach a production of 34.37 million barrels of crude oil a day this year, up 0.8% from last year, while non-OPEC countries are set to see a 0.7% increase in production to 66.3 million barrels a day.

The U.S. is set to produce 440,000 more barrels per day this year. “With this data we believe that fuel prices will stabilize in the first half of this year and will have limited impact on CPI,” ACB Securities analysts said.