INFLATION SPECIAL REPORT
January 2009
December shows small slow-down in inflation; VND is devalued; unemployment grows; but then, all economies are suffering in 2009.

Vietnam inflation reaches 22.97 percent in 2008
Posted: 25 December 2008 1617 hrs http://www.channelnewsasia.com/stories/afp_asiapacific_business/view/398466/1/.html

HANOI : Vietnam's consumer prices rose by 22.97 per cent in 2008, compared to 8.3 per cent in 2007, the state-run General Statistics Office (GSO) said Thursday.

Food prices were up by 49.16 per cent, housing and construction materials by 20.51 per cent, and beverage and tobacco by 10.75 per cent.

However year-on-year in December, inflation fell to 19.89 per cent, after a 24.2 per cent year-on-year rise in November.

Inflation has been slowing since August, when it peaked at 28.3 per cent.

For the third consecutive month, prices have fallen on a monthly basis, by 0.68 per cent between November and December. The fall comes amid lower world commodity and energy prices and domestic fuel price cuts.

Vietnam, after more than a decade of rapid economic growth, has struggled to contain inflation in 2008.

Earlier this year, the state bank raised its benchmark rate several times, from 8.25 per cent to 14 per cent.

But has recently been reversing its policy, last Monday cutting its rate for the fifth time since late October, as small and medium enterprises appeared hardly hit by difficult access to credit and the initial effects of the world economic turmoil.

Vietnam, a major exporter of manufactured goods such as clothing and footwear as well as commodities including rice, coffee and seafood, has already been hit by downturns in the US, Europe and other markets.

On Wednesday the government announced GDP growth of 6.23 per cent this year, below a target of around 6.5 per cent, according to state television.

Prime Minister Nguyen Tan Dung said the "focus" next year would be to "ensure social security and maintain growth," to reach a similar target of 6.5 per cent GDP growth in 2009.

To this purpose, the State bank also decided Thursday to "adjust" the value of the national currency, fixing the dong at 16,989 per dollar - a devaluation of three per cent compared to Wednesday's rate of 16,494 dong per dollar.

Vietnam inflation cools in December but still high year on year

http://www.monstersandcritics.com/news/business/news/article_1450230.php/_eca072__Vietnam_inflation_cools_in_December_but_still_high_year_on_year_

Hanoi - Vietnam's inflation dropped for the third month in a row but remained at nearly 23 per cent for the year, Vietnam's General Statistics Office said Thursday.

Vietnam's inflation was 8 per cent last year.

Commodities such as food and building materials have dropped this month, though food prices have shot up 37 per cent in 2008, and construction materials increased by 23 per cent this year, year-on- year.

Apparel and footwear increased 1 per cent this month, with overall inflation standing at 10 per cent, year on year.

After more than a decade of fast economic growth, Vietnam struggled to rein in galloping inflation in 2008. In May, inflation rose by nearly 4 per cent, the highest month-on-month growth.

Several international organizations predicted the country would face a collapse in investor confidence, with inflation slated to reach 30 per cent by year's end and a trade deficit of more than 20 billion dollars.

Vietnam's trade deficit remains a high 17 billion dollars, up from 14.1 billion last year.

Vietnam has not escaped macroeconomic instability as the nation is now facing the possibility of deflation. In order to cope, the government in mid-December announced plans to spend 6 billion dollars to shore up the economy.

Vietnam's economy is forecast to grow 6 - 6.5 per cent in 2009.

Vietnam devalues currency as growth, inflation drop

http://www.shanghaidaily.com/sp/article/2008/200812/20081225/article_385836.htm

 VIETNAM devalued its currency by 3 percent today as falling inflation and the weakest annual economic growth in nine years gave it the impetus to act. The central bank set today's dong mid-point at 16,989 per dollar versus 16,494 yesterday after a cabinet meeting in which Prime Minister Nguyen Tan Dung said gross domestic product grew 6.23 percent this year.

The Southeast Asian nation's economy has not grown slower since 1999 when it went up 4.77 percent.

Last year, Vietnam clocked 8.5 percent expansion and was a darling of the investment community. After a domestic overheating crisis earlier this year, and faced with the global slowdown, the government has cut its growth forecast to 6.5 percent.

Next year would be worse, Dung predicted.

"The year 2009 will be tougher than 2008 as we will be facing with a strong impact from the global economic downturn," a government statement quoted Dung as telling the cabinet in Ho Chi Minh City, Vietnam's commercial centre.

The government forecasts 6-6.5 percent growth in 2009, but the International Monetary Fund sees it coming in at 5 percent.

Consumer prices rose 19.89 percent in December, well below the government's forecast of 22 percent, while average inflation over the year was 22.97 percent, the government statistics office said today.

December was the 14th consecutive month of double digit inflation in Vietnam but the monthly figure has eased for three months running.

Earlier in the year, soaring inflation and a widening trade deficit sparked an overheating crisis in Vietnam that the government doused with three interest rate hikes and strict measures to curb credit growth.

But since the global credit crunch started turning into a worldwide economic slowdown, Hanoi has taken a policy u-turn.

The State Bank of Vietnam, the central bank, has slashed rates five times since late October, unwinding most of the earlier tightening, and lowered banks' compulsory reserve ratio, effectively flooding the financial system with money.

Prime Minister Dung has said promoting exports was a priority, and the government has announced plans for a US$6 billion economic stimulus package.

Foreign portfolio investment has fallen while export revenues have also slowed in Vietnam's major markets, though, and the dong has come under pressure to slip.

Until today, the authorities had devalued the dong mid-rate by around 2 percent and widened its tightly managed trading band three times this year, allowing it to effectively lose about 6 percent of its value against the dollar.

Still, the offshore, non-deliverable dong forwards market had priced in a further fall and the interbank dollar/dong market was frozen in recent weeks.

Traders had expected the central bank to allow the dong to weaken, and ahead of today's devaluation some said the trading band was likely to be widened again from the current 3 percent on either side of the mid-point.

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