Vietnam's rising headline inflation matter of concern: World Bank

This is despite the economy showing signs of recovery in the third quarter this year, particularly in exports and industrial production, with the gross domestic product growing by 5.3 per cent YoY in the quarter.

In contrast, core inflation, which excludes food and fuel, softened to 3.8 per cent YoY in September from 4 per cent in August, implying that the spike in headline inflation is mostly driven by sector-specific factors rather than broad-based price pressures, a domestic newspaper reported citing the report.

This sharp upward trend in headline inflation started in June and is primarily attributed to rising costs in food, housing materials and transportation and education services.

The sharp rise in headline inflation needs immediate attention from policymakers as it could undermine the economic recovery and erode consumer purchasing power, the report noted.

Credit growth, however, has slowed, dropping to 8.7 per cent YoY in September from 9.4 per cent in August, indicating a drop in consumer and investment activities.

Vietnam’s state budget deficit widened too to $5.9 billion in the third quarter from $4.6 billion in the second. Public investment increased by 45.3 per cent YoY, but reached only 48 per cent of the planned budget for this year.

Vietnam needs to balance its growth objectives with the imperative to keep inflation in check, the World Bank report added.

ALCHEMPro News Desk (DS)