Ktetaichinh’s Blog

December 26, 2009

forseen inflation in 2010

Filed under: Uncategorized — ktetaichinh @ 10:01 pm
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Consumer price inflation has continued to slow, having peaked on a year-onyear
basis in August 2008. However, Vietnam will remain highly vulnerable to
movements in international commodity prices (particularly for food and fuel),
which will continue to have a significant impact on the domestic rate of
inflation. The authorities took significant steps to damp down demand for
credit in 2008, but in response to the onset of the global economic recession
policymakers then changed tack. By making credit cheaper and actively
encouraging domestic banks to lend, the government has successfully boosted
demand for credit. This could fuel inflationary pressures in the short term,
and continued strong credit growth throughout the forecast period will have
a similarly stimulatory impact on inflation. Year-on-year consumer price
inflation is forecast to average 7.3% in 2009, before picking up to 8% in 2010.

The current-account deficit will narrow in 2009-10 owing to a reduction in the
merchandise trade deficit. The value of goods exports will fall in 2009, owing to
weak demand from Vietnam’s leading export markets and lower global prices
for its major goods exports. Trends in global crude oil prices suggest that the
value of Vietnam’s oil exports (the country’s largest category of goods exports)
will fall in 2009, before recovering marginally in 2010. The substantial increase
in the current-account deficit in recent years has been primarily a result of
soaring imports, a large proportion of which have been in the form of capital
goods bought by foreign-invested enterprises. However, given the uncertainty
currently affecting the global economy and the fact that foreign investors will
face difficulties obtaining financing in the forecast period, capital goods imports
will fall in 2009-10 relative to their high levels in recent years. The slowdown in
consumption growth will also curtail expansion in imports of consumer goods
in 2009-10

http://viet-studies.info/kinhte/VN_EIU_Risk_Sep09.pdf

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