VIETNAM Standard Chartered predicts 10.9 pct inflation in QII

Standard Chartered predicts 10.9 pct inflation in QII

VietFinanceNews.com - Standard Chartered Bank has forecast that the nation’s inflation rate in the second quarter will ease to 10.9 percent, before dropping back into single-digit territory in the third and fourth quarters.

Inflation in March fell to 14.1 percent from a peak of 23 percent last August, the bank noted.

Moderated inflationary pressure, coupled with an improved balance of trade and foreign reserves, should provide the State Bank of Vietnam (SBV) with ammunition for further interest rate cuts during the rest of the year, said the bank. They also predicted that the refinance rate would be cut to 12 percent this second quarter and to 11 percent by the end of the year.

“This is broadly in line with the State Bank of Vietnam’s target of reducing policy rates by 1 percent each quarter this year, given that inflation continues to slow,” a spokesperson for the Bank said. Following its first rate cut this year in March, the State Bank again cut key rates on April 10. The refinance rate sits at 13 percent, while the discount rate is down to 11 percent.

The policy of keeping rates low to cool inflation has been effective, but there was an added need to keep the economy from losing momentum this year.

Rate cuts signal that economic growth is gradually becoming once again a policy focus for the State Bank, following 12 months of a price-stability drive.

State Bank Governor Nguyen Van Binh has said that growth this year was expected at around 5.5-6 percent, down from 6-6.5 percent previously.

The Government will strive to ensure a “reasonable level” of economic expansion, although inflation still remains its main priority, Binh said.

With inflation down to 14.1 percent in March from its peak of 23 percent seven months earlier, and a stable currency, the State Bank had room to shift its attention to reinforcing economic growth, Standard Chartered said.

“Although growth is at its record low since 2009, there are reasons to remain optimistic,” the bank said.

During the 2009 downturn, the economy grew at a respectable 5.3 percent even though the first-quarter growth was a meager 3.1 percent.

The bank therefore maintained its forecast of 5.8 percent growth this year, with a pace in the second quarter of 5.4 percent to gradually accelerate to 6.4 percent and 6.6 percent in third and fourth quarters, respectively.

Standard Chartered has also forecast that two-year Government bond yields would ease to 10.6 percent this year, down from the current 10.8 percent.

http://www.vietfinancenews.com/2012/05/standard-chartered-predicts-109-pct.html