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Inflation at 26.8 percent, but growth less rapid
Consumer prices accelerated for a 16th month in June, suggesting the central bank may need to increase interest rates further to cool inflation that is running at the fastest pace in Asia.
Consumer prices rose 26.8 percent from a year earlier, the biggest jump since 1992, from a rate of 25.2 percent in May, according to figures released Thursday by the General Statistics Office.
But figures from the General Statistics Office’s website on Thursday also showed that inflation growth had slowed, with consumer prices rising 2.1 percent in June from a month earlier, compared with a 3.9 percent month-on-month increase in May.
Vietnam’s interest rates are already the highest in the region after the central bank increased borrowing costs three times this year.
Faster inflation is adding pressure on the government to take more steps to prevent surging global food and energy prices from worsening living conditions for the country’s 85 million people.
“Vietnam’s consumer prices aren’t going to go down very quickly,’’ said Sebastien Barbe, a Hong Kong-based strategist for the investment banking unit of France’s Credit Agricole SA.
“Inflation will remain in double digits for several quarters. We expect them to increase interest rates further, by another 2 percentage points.’’
Record oil and commodity prices are fueling inflation around the world.
Crude reached $139.89 a barrel on June 16, while prices of grains such as rice, corn, wheat and soybean reached unprecedented levels in 2008.
Food, rice
Food prices jumped 74.3 percent in June from a year earlier and 4.3 percent from May, the statistics office said.
Prices in a broader food category that includes rice rose 45.6 percent from a year earlier.
The government, which has made fighting inflation its priority, on June 3 cut the economic growth target for this year to 7 percent from 9 percent as it tries to slow price gains.
Vietnam is aiming for 2009 growth of as much as 7.5 percent, according to a statement posted on the government’s website June 7.
Growth quickened to 8.5 percent last year, the fastest in more than a decade.
Prime Minister Nguyen Tan Dung has pledged to tame inflation as he seeks to restore investor confidence after the nation’s benchmark stock index lost more than half its value this year.
Inflation “will be brought down to a single-digit figure in 2009 or early 2010,” Dung said in an interview to Bloomberg Television in Washington late Thursday.
The government, which caps gasoline prices to keep fuel affordable for Vietnamese, won’t raise fuel costs in June and will take into account global crude levels when deciding on any increase in July, Finance Minister Vu Van Ninh said on June 15 at the World Economic Forum on East Asia in Kuala Lumpur.
Capital controls
The State Bank of Vietnam weakened the dong by 2 percent on June 11 to prevent currency speculation and raised interest rates to 14 percent from 12 percent to cool inflation.
Stocks have slumped almost 60 percent this year, the world’s worst performance, and the dong is set for its biggest drop since 2001, falling 3.8 percent.
Vietnam’s “extensive’’ capital controls and the management of its currency would prevent overseas investors from fleeing the nation even as inflation accelerates and economic growth slows, Ping Chew, the Singapore-based head of Asian sovereign and corporate ratings at Standard & Poor’s, said last week.
The central bank announced Thursday that it would double the trading band for the dong.
Starting Friday, the currency will be allowed to trade up to 2 percent on either side of a daily reference rate the central bank sets for the dong against the dollar.
S&P was the first of three ratings companies to lower Vietnam’s credit outlook to negative, saying the country’s overheating economy was a risk to stability.
Prices in the category that includes construction materials jumped 23.7 percent in June from a year earlier and 1.9 percent month-on-month.
Prices in the category that includes transportation climbed 14.9 percent year-on-year.
Thanhnien
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