Covid-19 outbreak predicted to lower inflation in Vietnam to 5.76% in Feb

The impact of the Covid-19 epidemic was a main factor to drive down Vietnam’s inflation in the February this year to 5.76% year-on-year, significantly lower than a 7-year high of 6.43% in January, KB Securities Company has forecast.

February CPI forecast (%).

Vietnam’s consumer price index (CPI) growth in February is predicted to drop to 0.46% month-on-month and 5.10% year-on-year, given the brokerage’s expectation for lower pricing for most items in the consumer basket, while it is estimated the average core inflation would stand at 2.96% year-on-year.

Despite the drop in average headline and core CPI, inflation remains above the government's full-year target of 4%, and will likely remain so during the first quarter, said KB Securities, adding “it would give little room for the State Bank of Vietnam (SBV) to ease monetary conditions in the short term.”

This is the main reason why the SBV, the country’s central bank, may not move quickly on monetary easing to meet its economic growth target as seen by other central banks in the region.

According to KB Securities, average CPI figures should moderate into the second half of the year – helped by the base effect from the spike in pork prices in the second half of 2019.

The brokerage maintained its average CPI estimate for 2020 at 3.70%.

Meanwhile, a recovery in pork supplies, weaker demand and request by the Ministry of Agriculture and Rural Development to cut price caused live-weight hog prices in February to plunge.

It is estimated the live-weight hog prices from January 20 to February 19 should fall by 5% month-on-month and average VND80,000 (US$3.44) per kilogram.