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Standard Chartered predicts 10.9% inflation this quarter
The nation's inflation rate in the second quarter will ease to 10.9 per cent, before dipping back into single-digit territory in the third and fourth quarters, Standard Chartered Bank has forecast.
Inflation in March fell to 14.1 per cent from a peak of 23 per cent last August, the bank noted.
Moderated inflationary pressures, coupled with an improved balance of trade and foreign reserves, should provide the State Bank of Viet Nam (SBV) with ammunition for further interest rate cuts during the rest of the year, Standard Chartered said, predicting that the refinance rate would be cut to 12 per cent this second quarter and to 11 per cent by the end of the year.
"This is broadly in line with the State Bank target of reducing policy rates by 1 per cent each quarter this year, given that inflation continues to slow," the bank said. Following its first rate cut this year in March, the State Bank again cut key rates on April 10. The refinance rate sits at 13 per cent, while the discount rate is down to 11 per cent.
The policy of keeping rates to cool inflation has been effective, but there was an added need to keep the economy from losing momentum this year.
Rate cuts signal that growth is gradually returning as a State Bank policy focus, following 12 months of a price-stability drive.
State Bank Governor Nguyen Van Binh has said that growth this year was expected at around 5.5-6 per cent, down from 6-6.5 per cent previously.
The Government would strive to ensure a "reasonable level" of economic expansion, although inflation still remained its main priority, Binh said.
With inflation down to 14.1 per cent in March from its peak of 23 per cent seven months earlier, along with a stable currency, the State Bank had room to shift its attention to reinforcing economic growth, Standard Chartered said.
"Although growth is at its slowest since 2009, there are reasons to remain optimistic," the bank said.
During the 2009 downturn, the economy grew at a respectable 5.3 per cent even though the first-quarter growth was a meagre 3.1 per cent.
The bank therefore maintained its forecast of 5.8 per cent growth this year, with a pace in the second quarter of 5.4 per cent to gradually accelerate to 6.4 per cent and 6.6 per cent in third and fourth quarters, respectively.
Standard Chartered has also forecast that two-year Government bond yields would ease to 10.6 per cent this year, down from the current 10.8 per cent.
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