HSBC Global Research lowers Vietnam inflation forecast from 3.7% to 3.5%.

According to the latest report of HSBC Global Research, after a quiet year compared to other parts of the world, earlier this year, price pressure in ASEAN economies has increased significantly. In which, the cause comes from the price of energy and food.

However, compared with countries like Singapore, Thailand, and the Philippines, Vietnam is still in the group that is rated as inflation under control.

This assessment is similar to the assessment of other international organizations on inflation in Vietnam. For example, in the World Bank's macroeconomic update report in June 2022, although inflation in Vietnam has inched up, it is still significantly lower than the Government's target of 4%. Or the IMF believes that inflation is forecast to increase close to the target threshold, reaching 3.9% by the end of the year.

According to HSBC Global Research, energy price inflation in Vietnam has also persisted for a while. In which, transport prices increased to a record high, surpassing food inflation to become the main driving force for inflation.

In addition to the rising world oil price, the shortage of domestic petroleum supply makes Vietnam's energy scarcity even more serious. From January 2022, the largest oil refinery and petrochemical plant in Vietnam, Nghi Son Refinery and Petrochemical LLC, reduced capacity and was almost idle in February, before increasing capacity to about 80% in March. This forces the authorities to look for alternative sources.

The Vietnamese government committed to import an additional 2.4 million cubic meters of gasoline in the second quarter. Meanwhile, since April 1, the Government has also cut the environmental protection tax to VND 2,000 for gasoline and VND 700-1,000 for other fuels.

With the second pressure coming from the food group, according to HSBC Global Research, similar to other countries, Vietnam also experienced price increases. In comparison, though, the situation is better in Vietnam given the relatively stable domestic staple food production at the moment.

This was also mentioned by Finance Minister Ho Duc Phuc in a question-and-answer session on June 8. He commented, Vietnam is self-sufficient in food, which accounts for 40% of the basket of goods, therefore inflation pressure is less than other countries. "Countries with high inflation, but Vietnam has a lag and is self-sufficient in domestic consumption", the minister said.

In general, according to HSBC Global Research, the influence of energy and food products on basic commodities in Vietnam is not much. Accordingly, after considering many aspects, Vietnam has been slightly reduced its forecast for headline inflation in 2022, from 3.7% to 3.5% - below the target set by the State Bank of Vietnam. However, in the situation of high and prolonged energy prices, pushing up prices in general, this organization also noted, it is likely that inflation will sometimes surpass the ceiling of 4% in the second half of 2022 but only temporary.

Kylie Nguyen