Will inflation pressure continue to cool down?

The domestic gasoline price continued to decline in August and September.

>> Official points out risks to CPI during year’s end

The domestic gasoline price continued to decline in August thanks to (1) international gasoline prices maintained a recent downward trend and (2) the Government decided to reduce the import tax on gasoline from 20% to 10% from 8 August. Specifically, the prices of gasoline E5 RON 92 and gasoline RON 95 dropped another 5.4% in August. Since peaking at the end of June 2022, domestic gasoline prices have fallen by about 25%.

The primary element that contributed to decreased inflation in August 2022 was the decline in domestic gasoline prices. According to GSO, headline inflation in Vietnam increased by 2.9% yoy in August 2022 (a decrease from the previous month's rate of 3.1% yoy). Vietnam's CPI averaged 2.6% in 8M22.

Vietnam CPI reduction is mostly due to the drop of the transportation price index (-5.5% mom) and the slower growth of the food and food-related price index (down from 1.4% in July to 1.1% in August). The rise in hog prices, which has a significant impact on both the country's overall CPI and the index of prices for food and nonalcoholic beverages, has abated. In particular, the cost of a live hog has steadily dropped since reaching VND70,000/kg in mid-July and is currently retailing around VND64,000–65,000/kg.

“In the upcoming months, we anticipate that live hog prices would swing between VND60,000-70,000/kg. The only two sub-indices in August 2022 with bigger price increases than the prior month are the educational items price index (1.5% mom) and the healthcare and pharmaceutical goods price index (0.1% mom)”, said Mr. Dinh Quang Hinh, analyst at VNDirect.

Meanwhile, the most recent decrease in gasoline prices was made on September 21 by the Ministries of Industry and Trade and Finance. Due to these price reductions, the retail price of E5RON92 biofuel decreased by 450 VND to a maximum of 21,780 VND (0,92 USD) per litre and that of RON95-III by 630 VND to 22,580 VND per litre. Oil costs also decreased, with kerosene's price falling by 1,970 VND to 22,440 VND per liter and diesel's price falling by 1,650 VND to 22,530 VND. Price for mazut oil 180CST 3.5S was 14,650 VND per kg, down by 380 VND.

>> Inflation in Vietnam is still under control.

Petrol prices have changed 25 times so far this year, 13 times for the better and 11 times for the worse. The cost of gasoline has now reached its lowest point for the year.

Therefore, Mr. Dinh Quang Hinh continues to have faith in the government's ability to control inflation and achieve its goal of keeping the average CPI for 2022 below 4.0% yoy.

“We have lowered our average inflation forecast for Vietnam for 2022 from our previous prediction of 3.5% yoy to 3.2% (/- 0.2 percentage points). Recently, the government undertook successful anti-inflation measures, including tax reductions on petroleum products and a change to the inflation forecast to take into account the recent correction trend in global commodity prices”, said Mr. Dinh Quang Hinh.