Vietnam inflation could exceed 5% in 2023: analysts

Given the delay of the government’s economic and development recovery package, Vietnam's inflation may surpass 5% next year, a senior analyst said.

Dr. Nguyen Bich Lam, former head of the General Statistics Office, attributed the most inflationary pressure to supply chain inflation.

"Vietnam's economy has a characteristic that when the price of raw materials increases by 1%, the price of output products would climb by 2.06%, leading to an increase in inflation,” Lam told the forum "Vietnam Economic Forecast 2022-2023: Growth scenarios and prospects for some key economic sectors" held on Thursday.

Vietnam is at risk of importing inflation as its key trading partners like the U.S., EU, and South Korea all forecast alert inflation rates.

The VND350 trillion ($15.1 billion) socio-economic development and recovery program, as well as 2021 support packages have penetrated all sectors and increased overall demand. The significant rebound in demand for goods and services following a long period affected by Covid-19 has also put pressure on Vietnam's inflation in 2022 and 2023, Lam added.

The expert forecasted Vietnam's inflation to be 4-4.5% in 2022 and may exceed 5% in 2023 in case the high inflation rate remains in its key partner economies.

Dr. Lam has proposed several solutions to control Vietnam's inflation under 4% over the 2021-2025 period, in line with the central bank’s targe.

Firstly, the government should promptly remove obstacles in mechanisms, policies, and administrative procedures, as well as create an equal and open business environment to promote total supply and reduce inflationary pressures.

Second, raw material supply should be diversified and not reliant on a single market or region. Authorities should encourage the search for supply and markets for products.

Thirdly, projections and reserves of petroleum in the form of products rather than money are required to assure energy security. The impact of rising global petroleum prices on Vietnam’s economic stability and development should be minimized.

Fourthly, authorities must monitor global price and inflation movements and timely warn of local inflation risks, as well as control and stabilize prices of state-managed products such as electricity, health care, and education services.

Standard Chartered in April forecasted 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.

Maybank Kim Eng Securities recently predicted Vietnam’s inflation of 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.