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Weak export demand to contain inflation, analyst says
Inflation in Vietnam will be contained so long as demand from abroad continues declining, said Tai Hui, head of Southeast Asian economic research at Standard Chartered Plc in Singapore.
“Vietnam’s economy is still offset by the weakness in the external markets,” Hui said in an interview in Ho Chi Minh City Friday. “If you consider your actual and potential growth, that gap is still there, so until we have seen that gap is closed I don’t see inflation as an imminent threat right now.”
A slowdown in economic growth to 3.1 percent in the first quarter and a decline in commodity prices from a year ago have contributed to weaker inflation, DBS Group Holdings Ltd. said last month. The economy grew 4.5 percent last quarter from a year earlier and consumer-price increases slowed for 10 months to 3.9 percent in June, the lowest since January 2004.
Vietnam’s exports fell 10 percent in the first half from a year earlier, with oil exports declining 42 percent and coffee shipments dropping 12 percent, according to the Hanoi-based General Statistics Office.
“A big risk for Vietnam is always commodity prices because when commodity prices increase substantially the inflationary pressure in the economy also increases,” Hui said. Vietnam “will face inflationary pressure earlier than other economies,” the economist said.
Hui said Vietnam’s year-on-year inflation at the end of 2009 will be around 3 percent to 5 percent. Inflation has slowed each month since August 2008, when consumer prices climbed 28.3 percent, the fastest pace since at least 1992.
Time, liquidity, confidence
Hui, who was in Vietnam to attend a business conference on Friday, said time, liquidity and confidence would “play key role in the economic recovery of Asia.”
It would take time for governments’ fiscal stimulus to take effect, he said.
Liquidity and confidence, meanwhile, are key elements to support financial markets and investment as well as drive consumption, Hui told a conference that gathered representatives from about 200 leading Vietnamese firms to discuss post-crisis opportunities.
Economists at the event called on the Vietnamese government to continue improving the country’s infrastructure and human resources to ensure sustainable economic growth.
Hui suggested that Vietnam follow China’s example in infrastructure development.
“You can have the cheapest production cost in the world, but if you can’t deliver your products to customers in time, it’s totally worthless,” he said at the conference.
thanhnien, bloomberg
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