Despite surging oil and raw material prices, Vietnam's inflation may be well under control this year, at 3.7%, below the central bank’s target of 4%, according to HSBC.
The inflation pressure remains at a low level compared to other ASEAN countries, climbing only 0.2% from April and 2.6% year-on-year, the bank said in a report.
HSBC attributed the low rate to lower transport costs stemming from the April decline in global oil prices and Vietnam’s reduced environmental protection tax. Meanwhile, food costs fell 0.1% from last month as prices of domestic agricultural goods remain stable, unlike other regional countries.
However, prices in several sectors like education, services, and retail have risen. The cost of housing and building materials climbed by 0.6% against March, reflecting higher utility and rental expenses as laborers return to cities post pandemic.
The creditor noted that volatility in the U.S. and China has worsened trade hurdles. The shift in U.S. demand from products to services post pandemic will have an impact on Vietnam's exports.
The supply chain disruptions caused by China's lockdown could also harm Vietnam's exports. As China accounts for 30% of Vietnam's imports, the former's transport congestion would impede the latter's future export growth.
Given China's zero-covid policy, raw material security would be a major problem for Vietnam's manufacturers, HSBC added.
Maybank Kim Eng Securities predicted Vietnam’s inflation at 4% in 2022, given the surging demand induced by economic reopening, supply pressures stemming from the ongoing Russia-Ukraine war and China’s lockdown, or even supply shocks like Indonesia's palm oil export ban.
In April, Standard Chartered forecast Vietnam’s inflation in 2022 and 2023 at 4.2% and 5.5% respectively, due to supply-side factors including rising commodity prices, especially given the current global geopolitical tension.
Nguyen Bich Lam, former head of the General Statistics Office, on Thursday said he expected Vietnam's inflation to be 4-4.5% in 2022, which could exceed 5% in 2023 in case high inflation rates persist in its key partner economies like the U.S., the EU, and South Korea.