Illustration. (Photo: VietnamPlus)Hanoi (VNA) – HSBC expected persistent high energy prices to continue driving headline prices up over 4% in the second half of 2022, but only on a temporary basis.
In its latest report, HSBC Global Research noted price pressures have now picked up in several markets in ASEAN, after a year of low inflationary pressure compared to other parts of the world.
“The biggest risk to price stability in the region, so far, is the surge in global energy and food prices,” the report said.
The bank explained that the inflation risk in ASEAN countries has increased since the beginning of 2022, leading to a rise in both core and headline inflation rates compared to the period before the COVID-19 pandemic broke out.
However, the impacts are different in each country, and inflation pressure in Singapore, Thailand and the Philippines has become heavier, while in Vietnam, Malaysia and Indonesia, inflation has stayed under control, the report said.
But headline inflation is likely to increase sharply in the second group soon, especially in the context of rising energy prices, it predicted, adding that although the world oil price has "cooled down" compared to its peak in March, it is still at a high level, while the price of natural gas continues to increase gradually.
In Vietnam, energy price inflation has also persisted for a long time. Transport prices hit a record high, surpassing food inflation to become the main driver of Vietnam's headline inflation, it said. Despite rising energy prices, food inflation has remained moderate, helping control the overall increase in headline inflation so far.
In the report, HSBC also increased its inflation forecast for Thailand, Singapore, Indonesia and the Philippines.
After considering both inflation and growth, HSBC revised its forecast for Vietnam's operating interest rates in 2022.
While the current inflation rate remains below the 4% target, the bank expects persistent high energy prices will continue to push overall prices up. It is likely that inflation will sometimes surpass the State Bank of Vietnam’s ceiling rate of 4% in the second half of 2022, but only temporarily, said the report.
That situation will likely cause the bank to adjust interest rates by 50 basis points in the third quarter of 2022 before raising the rates three times, by 25 basis points each time in 2023, the report underlined.
On top of surging global oil prices, a domestic petroleum supply shortage has exacerbated Vietnam’s energy crunch. Since January, Vietnam’s largest refinery, Nghi Son Refinery, has been running at a reduced operating rate, coming close to shutdown in February, before returning back to about 80% capacity in March. This has forced the authorities to look for alternatives to alleviate the energy pressure.
The Government of Vietnam has pledged to import an additional 2.4 million cubic meters of petroleum in the second quarter of 2022.
Since April 1, the Government has also cut the environment tax, the largest of all taxes and fees on fuel, to 2,000 VND on gasoline and 700 – 1,000 VND on other fuels.
Despite elevated energy prices, moderate food inflation, which has a bigger weighting in the CPI basket, has so far helped to curb the overall rise in headline inflation, it noted.
Minister of Finance Ho Duc Phoc, in a discussion session at the National Assembly on June 8, noted Vietnam’s independence in the food supply, which accounts for 40% of the commodity bundle used for the calculation of the consumer price index (CPI), something that is a key factor in helping the country keep inflation under control./.
