Singapore: Vietnam's inflation has reached "worryingly high" levels, HSBC Holdings said, as the Southeast Asian nation joins others in the region that are seeing resurgent price pressures amid an economic recovery.
Consumer prices climbed 9.46 per cent in March, the biggest gain in a year, up from 8.46 per cent in February, the government statistics office said yesterday. Vietnamese inflation has accelerated for seven months, adding to pressure on the central bank to raise interest rates.
Benchmark inflation indexes in India and China hit 16-month highs in February and prices may rise "abruptly" in Thailand in the coming month, according to Citigroup.
In Vietnam, seasonally adjusted figures suggest that month-on-month inflation accelerated, HSBC said.
"The latest number is still worryingly high," Wellian Wiranto, a Singapore-based economist for HSBC, said in research published after the figures were released. "Inflationary pressures will continue to be strong in the coming months."
The State Bank of Vietnam has held its benchmark interest rate at a one-year high of 8 per cent since December. Fitch Ratings this month said the country needed "strong policy tightening," as it put Vietnam's debt rating on negative watch.
Inflation was driven by processed food and housing-related expenditures, amid "buzzing construction activities," Wiranto wrote.
Inflation momentum
"Asia's inflation mom-entum is gradually rising," said Johanna Chua, Hong Kong-based head of Asian economic research at Citigroup. "Not only has growth been robust in recent quarters, boosted by resilient exports and domestic demand, but most countries are now seeing year-on-year credit growth start to recover."
Central banks across Asia are raising interest rates as the region leads the global economy out of the worst recession since the Second World War.
The Reserve Bank of India unexpectedly increased its reverse repurchase rate on March 19 to 3.5 per cent from a record-low 3.25 per cent. Malaysia may lift borrowing costs further to avert asset bubbles after the key rate was raised by a quarter-point to 2.25 per cent on March 4, central bank chief Zeti Akhtar Aziz said in a March 12 interview.
In Vietnam, "pressure on authorities to tighten policy will grow further," Chua said in a note on Wednesday. "Without further tightening, pressure on dong weakness could intensify again after seeing some improvement in foreign exchange liquidity recently?"
