Vietnam inflation to rise in near term: StanChart

Standard Chartered Bank forecasts a rise in inflation in the near term for Vietnam, with the inflation expected to increase to 3.8% year-on-year in February, up from 3.6% in January.

Vietnam’s inflation in February would mark the seventh consecutive month of inflation remaining below 4% year-on-year, according to Standard Chartered's latest macroeconomic update about Vietnam released last Friday.

The recent upward reversal since last December continued in February; any moderation would be only temporary. Demand-driven factors may contribute to further inflationary pressure in the near future, the bank noted.

The National Assembly, the country's legislature, has raised the 2025 GDP growth target to at least 8% (from 6.5-7% approved in November last year), with a higher inflation expectation of 4.5-5% to create room for monetary policy flexibility.

"The stronger growth outlook could help sustain low interest rates in the short term. However, Standard Chartered expects the State Bank of Vietnam (SBV) to raise interest rates by 50 bps in Q2/2025 in response to rising inflation," the bank wrote.

Retail sales growth is likely to ease to 8.2% year-on-year in February, down from 9.5% in January. Meanwhile, export growth may rise to 23.2% year-on-year, supported by a low base and continued improvements in electronics exports.

Imports and industrial production likely grew 24% and 6.2% year-on-year. respectively. However, Vietnam’s monthly trade surplus may narrow to $1.5 billion, down from $3 billion.

“We stay cautious on the near-term economic outlook, as January’s macro indicators showed a moderation in both domestic and external data. Uncertainties around U.S. trade policies also pose potential risks, given Vietnam’s large trade surplus with the U.S. In response, Vietnam has indicated its willingness to import more U.S. agricultural products," said Tim Leelahaphan, senior economist for Thailand and Vietnam, Standard Chartered Bank.

Previously, at the Global & Vietnam Outlook H1 2025 in HCMC on February 20, Leelahaphan said Vietnam's government expects 8% growth; that should mean more demand and inflation could continue to rise throughout 2025; that's a challenge for Vietnam’s economic growth in 2025.