No Need to Worry about Short Run Surging Inflation in Vietnam, WB Says

Diep Nguyen

10:55 03/07/2019

BizLIVE -

Nevertheless, modest inflationary pressures have emerged, due to the aforementioned hike in the power tariff and fuel prices as well as to a planned increase in administrative prices for healthcare and education.

No Need to Worry about Short Run Surging Inflation in Vietnam, WB Says

Photo: Bloomberg

Despite a recent uptick in headline inflation, price pressures are expected to remain subdued in the short run. Vietnam’s consumer price index has ticked up slightly in the first five months of 2019, driven by hikes in administered prices (for electricity and fuel). 
The headline CPI rose by 2.9 percent (y/y) in May 2019, up slightly from 2.6 percent in January 2019, and is attributed to moderate food price increases. Over the same period, core inflation ticked up slightly to 1.9 percent from 1.7 percent in December 2018, still below 2 percent, as has been the case since June 2015. 
Nevertheless, modest inflationary pressures have emerged, due to the aforementioned hike in the power tariff and fuel prices as well as to a planned increase in administrative prices for healthcare and education. 
Despite moderate inflation, the State Bank of Vietnam maintained a prudent monetary policy stance to support its twin goals of sustaining macroeconomic stability and supporting overall economic growth. 
The targets include achieving GDP growth of 6.6-6.8 percent, maintaining CPI inflation below 4 percent, and reaching a credit growth rate of 14 percent. Monetary policy became somewhat more restrictive in 2018, when the State Bank of Vietnam (i) lowered the credit growth target across the banking system; (ii) set a credit ceiling growth for individual commercial banks; (iii) constrained real estate lending by imposing higher risk weights; (iv) limited short-term funding for long-term lending; and, (v) contained consumer lending by introducing the cap on the share of cash loans as well as prohibiting further lending to clients with a bad credit history. 
As a result, credit growth has slowed to about 13 percent (y/y) in March 2019 compared with the annual target of 14 percent (figure I.14). In addition, less buoyant credit activity in the 2018 and first months of 2019 is partly hampered by growing risk aversion among banks that remain saddled with outstanding non-performing loans.

DIEP NGUYEN

Tin liên quan

Cùng dòng sự kiện