HSBC lowers Vietnam inflation forecast

Food and gasoline prices are two main drivers of inflation in ASEAN, but are likely to hit Vietnam less hard than other countries, the bank said.

According to the General Statistic Office, the consumer price index (CPI) rose by 2.25 percent in the first five months this year as against 1.29 percent last year, driven by the prices of gasoline, food and some other goods.

HSBC said Vietnam’s energy inflation has gained further momentum, with transportation, one of the items in the basket of goods and services that make up the CPI, seeing the biggest jump last month of 2.34 percent.

The rise in global fuel prices, and reduced production by Vietnam’s biggest refinery, Nghi Son, has worsened a shortage in the country.

The government on Monday adjusted gas prices up by 2.5 percent to VND32,370 ($1.39) a liter. It has hiked prices by over 35 percent so far this year.

Vietnam started to feel the rising food costs, but the pressure has eased thanks to steady domestic supply, HSBC said.

It expected inflation to temporarily surpass the government’s target of 4 percent if gas prices keep rising.

The State Bank of Vietnam could raise interest rates by 50 percentage points in the third quarter, and another 75 points next year to cope with inflationary risks, it said.