Vietnamese inflation may accelerate to as much as 15 percent, the highest level in two years, before slowing by the end of 2011, Credit Suisse Group AG said.
Consumer-price growth may peak at 13 percent to 15 percent within “about three months,” Robert Prior-Wandesforde, the head of India and Southeast Asia economics at Credit Suisse, said by telephone from Singapore today.
The fastest economic growth in three years, rising food prices and currency weakness have fanned local price pressures. The central bank has raised interest rates only once since the start of 2010, lagging behind counterparts from Thailand to Malaysia in boosting borrowing costs to damp inflation.
“Even if they were to raise interest rates again now or cut spending immediately, it couldn’t be expected to have that quick an impact,” said Prior-Wandesforde. The economy is “in trouble” due to the trade deficit, inflation and weakness in the dong, Credit Suisse said in a note received today.
The government currently is probably tilting toward controlling consumer-price growth rather than boosting economic expansion, Prior-Wandesforde said. Short-term measures such as subsidies and controls on exports and prices are the only way to have an immediate impact on inflation, though they are hard to enforce, he said.
Vietnam’s ruling Communist Party set a goal of as much as 8 percent economic growth annually until 2020 at the National Congress, a five-yearly meeting in Hanoi to select top leaders. Prime Minister Nguyen Tan Dung is set to serve a second term after being reappointed to the party’s highest body at the gathering, which is due to end today.
Investors are scrutinizing the proceedings for clues on whether the government will prioritize lowering inflation or permit another jump in lending to fuel economic growth.
The government doesn’t expect the inflation rate to exceed 7 percent by the end of the year. The reading last exceeded 15 percent in January 2009. Consumer-price growth may slow to 8 percent by the end of 2011 as interest rates increase, Credit Suisse said in the note.
The economy expanded 6.8 percent last year, the fastest pace since 2007, and the government is targeting growth of at least 7 percent this year.
--Jason Folkmanis in Ho Chi Minh City. Editors: Sunil Jagtiani, Cherian Thomas
To contact the reporter on this story: Jason Folkmanis in Ho Chi Minh City at firstname.lastname@example.org
To contact the editor responsible for this story: Stephanie Phang at email@example.com