Inflation in 2018 forecasted at 3.5-3.8pct: NFSC

11-Apr-2018 Intellasia | NDH | 6:00 AM Print This Post

In the latest economic report, the National Financial Supervisory Commission (NFSC) assessed that the inflation in Q1/2018 is basically strictly controlled.

In March 2018 alone, CPI decreased 0.27 percent from the previous month, up 2.66 percent from the same period, and 0.97 percent from the beginning of the year. The average CPI in the first three months of 2018 increased 2.82 percent from the same period last year. The core inflation remained stable, up 1.38 percent from the same period last year, lower than the target set in the year at 1.6-1.8 percent.

The CPI in March decreased from the previous month, in line with the consumption rule after the Lunar New Year in recent years. According to NFSC, the reason for the similar increase in CPI in Q1/2017 included the increase in medical service group (up 29.13 percent from the same period, contributing to overall CPI increase of 1.13 percentage points); transport group (up 2.97 percent from the same period, contributing 0.28 percentage points to the overall CPI increase), and housing and construction material group (up 2.96 percent from the same period, contributing 0.47 percentage points to the overall CPI increase).

NFSC forecasts that without a mutation and the increase in power price, inflation in 2018 will increase 3.5-3.8 percent from the same period last year compared to the set target for the year at four percent.

According to the Committee, the fact that power price is forecasted to increase 6.08 percent since the end of 2017 helps CPI in 2018 to improve about 0.1 percentage points.

Food price has increased 1.2 percent from the beginning of the year, contributing to the 0.27 percent percentage point increase in CPI. If the food price swells at an equivalent level to the growth in 2015 at 1.5 percent and in 2016 at 3.5 percent, inflation will improve 0.4-0.7 percentage points.

The price of non-energy commodities will not put much pressure on inflation as the world’s commodity price in 2018 will be lower than in 2017.

However, for crude oil, the price increase of about 15-17 percent to $60-62 per barrel will help price of traffic group to increase about 5-7 percent from the previous year, contributing about 0.5-0.7 percent to the overall CPI increase.

According to this agency, the remaining room for inflation to adjust public service price in 2018 will be 1-1.2 percentage points.

“If power price does not increase in 2018, the price of health care and education services only surge 40-60 percent from the growth of these two groups in 2017, then inflation will be 3.5-3.8 percent from the same period”, said the Committee’s report.

*Liquidity is stable thanks to SBV’s foreign currency purchase and slow disbursement of government bonds

At the end of Q1/2018, the average interest rate was 0.83 percent (down 0.47 percent from the end of the year 2017), the one-week term interest rate was 0.98 percent, and the one-month interest rate was 1.73 percent (down 0.9 percent and 1.2 percent from the end of 2017).

Explaining about this development, NFSC said the liquidity of the banking sector was stable, partly because of the State Bank’s increased the purchase of foreign currency and slow capital disbursement.

Meanwhile, the Loan to Deposit (LDR) ratio at the end of Q1/2018 increased to 88.2 percent, from 87.8 percent at the end of 2017.

The capital mobilisation interest rate from the people and businesses was relatively stable. Deposit rates in dong for 12-month term were popularly 6.5-7.5 percent; the average deposit rates for 12-month term were 6.81 percent, up 0.02 percent from the end of 2017.

*The exchange rate till the end of Q1 increased 0.25 percent, remaining stable thanks to abundant foreign currency supply

The balance of payment in 2017 is the highest in five recent years, mainly thanks to the sharp increase in the capital balance with 85 percent. The reason comes from the sharp increase in FDI.

In Q1/2018, NFSC forecasts that the international balance continues to run high surplus thanks to continuous trade surplus. However, for the entire year 2018, the trade balance may be adversely affected by fears over the US-China trade collision and rising protectionism.

According to the assessment of this agency, the US dollar/dong exchange rate is still stable, and continues to be supported by the abundant supply of foreign currency.

From the beginning of the year till March 29, 2018, the exchange rate of commercial banks increased about 0.25 percent, the exchange rate on free market swelled about 0.4 percent from the beginning of 2018. The central exchange rate at the end of March was 22,463 dong/US dollar, up 0.21 percent from the end of 2017.

 

Category: Economy, Vietnam

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