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Inflation rate may accelerate, says Goldman Sachs
Vietnam’s inflation may accelerate, prompting tighter monetary policy that slows economic growth, Goldman Sachs Group Inc. said, adding it may be too early for investors to bet the country’s economic problems are over.
Higher food prices and the end of a cap on medicine prices may push inflation higher, Goldman Sachs said in a note Monday.
Vietnam’s inflation rate was 26.8 percent in June.
The benchmark VN-Index has jumped 28 percent since June 20, when it fell to the lowest since February 2006, leaving it down by half this year.
The rebound was sparked by lower than expected imports, which eased concern that the trade deficit would widen.
“Investor sentiment on Vietnam seems to have bounced back from a recent bottom,’’ said Helen Qiao, a Hong Kong-based economist at Goldman Sachs.
“It is probably too early to dismiss the macro instability risks and conclude that Vietnam is home free for a soft landing this year.”
For all of 2008, prices will increase 22 percent, up from an earlier prediction of 19 percent, the investment bank said.
Goldman also cut its economic growth forecasts.
The economy will grow 6.9 percent this year, slower than an earlier prediction of 7.3 percent.
“Tightening of monetary policy is unavoidable because of inflation,’’ Qiao said.
“To avoid the boom and bust cycle we believe the government will need to strike a delicate balance between tightening policies to curb inflationary pressure and not over tightening.’’
Thanhnien
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