Vietnam Inflation Accelerates in January After Interest-Rate Cut

Vietnam’s inflation accelerated in January, limiting the central bank’s scope to add to last month’s interest-rate cut and bolster the economy.

Consumer prices climbed 7.07 percent from a year earlier after rising 6.81 percent in December, the General Statistics Office said in Hanoi today. The median estimate in a Bloomberg survey of six economists was 6.95 percent.

The central bank cut its refinancing rate for the sixth time last year in December as the economy expanded 5 percent in 2012, the least since 1999. The World Bank is concerned about the policy easing, as the country faces the risk of double-digit inflation in 2013, the World Bank’s lead economist for Vietnam, said in Ho Chi Minh City this week.

“Good, sound macroeconomic policies are key to maintaining macroeconomic stability and low inflation,” Sanjay Kalra, the senior resident representative of the International Monetary Fund in Vietnam, said earlier. “Underlying inflationary pressures are still a little bit on the high side.”

Moody’s Investors Service said in a Jan. 21 report that Vietnam’s inflation rate is high when compared to the rest of the Asia-Pacific region. Among the risks is that protracted slow economic growth may lead to excessive policy easing, Johanna Chua, the Hong Kong-based head of Asian economic research at Citigroup Inc., said in a research note this month, predicting another 100 basis-point cut in borrowing costs this year.

Still, the pace of price gains appears “modest” for the beginning of the year, given the upcoming Tet holiday, Vietnam’s government said in a Jan. 19 posting on its website. The lunar New Year holiday, known as Tet, is in February this year.

Consumer prices gained 1.25 percent in January from the previous month, today’s report showed. Prices in the category including health care and pharmaceuticals surged 55.6 percent from a year earlier, while education jumped 17.3 percent.

--Jason Folkmanis in Ho Chi Minh City. With assistance from Minh Bui in Sydney. Editors: Rina Chandran, Oanh Ha

To contact Bloomberg News staff for this story: Jason Folkmanis in Ho Chi Minh City at folkmanis@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

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