Inflation predicted to decrease, while VND could strengthen against USD

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The General Statistics Office has just released a report on the economic situation in the first eight months of 2021. The negative impact from the pandemic exacerbated difficulties, notably in the southern economic region. In August alone, the industrial production index went down 7.4 per cent on-year. However, the figure increased by 5.6 per cent compared to the first eight months of 2020.

Total retail sales of consumer goods and services only decreased by 4.7 per cent over the same period last year. If excluding the price factor, the figure decreased by 6.2 per cent.

The sluggish growth in consumption demand indicates a negative impact from the pandemic. VCBS forecasts Q3 growth of about 2-2.5 per cent over the same period.

The consumer price index (CPI) in August 2021 increased by 0.25 per cent compared to the previous month, which is equal to an increase by 2.82 per cent compared to July 2020, corresponding to an increase of 2.51 per cent compared to December. The main factor which drives up CPI is food consumption amid social distancing.

VCBS forecasts that, in September, inflation may decrease by 0.2-0.3 per cent, corresponding to an increase of 2.41-2.52 per cent on-year.

The major reasons for this development are the lack of room for increases in food prices while these are not much higher; decreases of some public service prices, such as electricity, water, and telecommunications, which are hindering the CPI; and no foreseeable tuition fee increase in 2021.

In August, deposit interest rates were almost unchanged. Following the statement of the State Bank of Vietnam to use maximum resources to support businesses in the context of the pandemic, many commercial banks reduced lending interest rates in a timely manner to support firms.

Furthermore, VCBS forecasts that the VND will strengthen against the USD. The fluctuation band shall be less than 2 per cent this year. VCBS has already taken the possibility of USD appreciation against other strong foreign currencies into consideration.

Developed countries are one step further in reopening their economies thanks to vaccines. However, this achievement is threatened by a new strain with a rapid spread. In the meantime, although easing monetary policies still remain, VCBS observed some proposals on neutralising these policies.