Is Vietnam inflation still under control in 2024?

In KB Securities Vietnam’s view, average CPI could remain stable in 4Q, supported by a high base in the same period in 2023, while MoM increase may be well controlled with: First, pork prices are expected to decline slightly and stabilize due to increased supply and the gradual control of diseases. Second, a falling exchange rate will reduce pressure on imported input price. Third, oil prices remain at USD75-80 (-10% YoY). Fourth, the increase in state-managed goods (electricity, education and healthcare) will not put too much pressure on the CPI and will be proactively balanced.

Crude oil prices saw strong volatiles and showed signs of peaking in 2Q24. In 3Q24, Brent oil prices plunged to USD70/barrel over concerns about the economic recession in the US, the lackluster recovery of the Chinese and European economies, and the gradual stabilization of crude oil supplies. In the last three months of 2024, KB Securities Vietnam forecasted that crude oil prices may remain around the current level, averaging USD75-80/barrel (-10% YoY) due to: (i) Gloomy economic data from Europe and China when support moves have not been reflected in the actual situation. (ii) The US economy may decline slightly in 4Q. Meanwhile, oil prices are forecast not to fall more sharply than the current level because the OPEC group clearly shows its policy of tightening production to support oil prices and uncertain risks related to tensions between Iran and Israel.

The average price of live-weight hogs in September rebounded to VND65,000/kg (2%MoM and 19%YoY). Pork prices showed signs of cooling down in 3Q but rose again in September due to the typhoon Yagi-induced supply shortage. In Northern provinces, pork prices have balanced and decreased again after the storm due to stable supply and demand, while the African swine fever has been controlled across localities. The total number of hogs in the country as of the end of September increased 2.5%YoY, and the output of live pigs for slaughter in 9M24 is estimated at 3,835.0 thousand tons, up 5.2% YoY (of which the 3Q output is estimated at 1,287.6 thousand tons, up 4.5%). KB Securities Vietnam forecasted that pork prices in the last three months of the year would remain stable at around VND65,000-70,000/kg thanks to recovering supplies.

By the end of September 2024, the export price of rice with 5% broken from Vietnam dropped 5% YoY/11% YTD to USD562/ton. Domestic rice prices have also been declining since August 2023. KB Securities Vietnam forecasted that export rice prices would continue to decrease in 4Q due to: (i) Increased supply when India - the world's largest rice exporter loosened rice export restrictions; (ii) low consumption demand in large markets such as China. In 7M24, China's rice imports fell 56.9% in volume and 51.8% YoY, marking the third consecutive year of decline.

It is not likely that construction material prices will rebound in 4Q due to: (i) Domestic steel prices remain stable as demand has not recovered strongly and input material prices (iron ore & coking coal) are low. (ii) Gloomy developments in the real estate market as new projects still face difficulties in accessing capital and legal issues.

“The average retail electricity price was raised 4.8% from October 11, 2024, which has been mentioned in our previous report. Accordingly, this will cause the CPI to increase by about 0.04%. We believe that this increase will not put much pressure on the average CPI increase in the context of forecasting prices of other commodities (pork, rice, oil, and imported raw material prices) to remain stable or tend to decrease slightly at the end of the year”, said KB Securities Vietnam.

In 3Q24, most schools have raised tuition fees, and prices of educational goods have also increased due to peak demand in September. Therefore, KB Securities Vietnam believed that the increase would slow down in the last months of the year. In addition, compared to the high base level of 2023, the price increase pressure of the education group is not too large, so it expects the CPI of the education group in the whole year of 2024 will increase by 6% YoY.

During the last quarter, the import price index of essential goods continued to decrease in line with the world commodity prices. As global demand is not expected to change much in 4Q, while the exchange rate is forecast to continue to decrease, commodity prices will not fluctuate much, KB Securities Vietnam  believed that imported raw material prices would continue to witness a slight decrease.