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Copyright © 1998-2013 Vietnam Venture Group, Inc. All rights reserved. July 9, 2008
INFLATION SPECIAL REPORT
JUNE 2008 Update from media sources on the state of Vietnamís bubble economy.
For the first time in years we see what appears to us to be a substantial discrepancy in what the domestic Vietnamese media reports to the nation on the state of the economy, and what the world media reports about the Vietnamese economy. We think this is important enough to write about, even as we no longer publish such wordy material. We thank the original sources for their kind permission to republish, and recognize their ownership of and copyrights in all the data below.
( TF ) 06/26 11:36
HANOI (Thomson Financial) - Vietnamese consumer prices rose 26.8 percent in June compared to the same month last year, driven mainly by sharply higher food prices, statistics from the communist government showed Thursday.
Prices rose an estimated 2.1 percent between May and June, a slowdown from the 3.9 percent rise a month earlier, the General Statistics Office (GSO) said in an early estimate.
Inflation for the first six months of the year has reached 18.4 percent, the GSO said.
Food and beverage costs in June rose by 45.6 percent year-on-year, with the staple food rice and other grains up 74.3 percent.
The GSO also said Vietnam's trade deficit has more than tripled to an estimated $14.8 billion for the first half of 2008.
Vietnam June inflation surges
to nearly 27%
28-JUN-2008 Intellasia | Bloomberg
Jun 28, 2008 - 7:00:00 AM
Consumer prices gained 26.8% from a year
earlier, the biggest jump since at least 1992, from a rate of 25.2% in May,
according to figures released by the General Statistical Office in Hanoi today.
Prices rose 2.1% from the previous month.
Vietnam's interest rates are already the highest in the region after the central bank increased borrowing costs three times this year. Faster inflation is adding pressure on the government to take more steps to prevent surging global food and energy prices from worsening living conditions for the country's 85 million people.
"Vietnam's consumer prices aren't going to go down very quickly,'' said Sebastien Barbe, a Hong Kong-based strategist for the investment banking unit of France's Credit Agricole SA. ``Inflation will remain in double digits for several quarters. We expect them to increase interest rates further, by another 2 percentage points.''
The State Bank of Vietnam weakened the dong
by 2% on June 11 to prevent currency speculation and raised interest rates to
14% from 12% to cool inflation.
Stocks in the Southeast Asian nation have slumped almost 60% this year, the world's worst performance, and the dong is set for its biggest drop since 2001, falling 3.8%.
Vietnam's ``extensive'' capital controls and the management of its currency will prevent overseas investors from fleeing the nation even as inflation accelerates and economic growth slows, Ping Chew, the Singapore-based head of Asian sovereign and corporate ratings at Standard & Poor's, said last week.
The central bank announced today that it will widen the trading band for the dong. Starting tomorrow, the currency will be allowed to trade up to 2% on either side of a daily reference rate the central bank sets for the dong against the dollar, from 1% now.
S&P was the first of three ratings companies to lower Vietnam's credit outlook to negative, saying the country's overheating economy was a risk to stability.
Prices in the category that includes construction materials jumped 23.7% in June from a year earlier and 1.9% month-on-month. Prices in the category that includes transportation climbed 14.9% year-on-year.
Contrast the first two reports above, with this one, below.
Wednesday, June 25, 2008 Vietnam's inflation rate slowed
this month and the government will bring the pace of year-on-year consumer price
increases to below 10% by 2010 from 25% now, Prime Minister Nguyen Tan Dung
``Thanks to the strong measures inflation has been reduced,'' Dung, 58, said in an interview from Washington following meetings with President George W. Bush and former U.S. Federal Reserve Chairman Alan Greenspan. The pace ``will be brought down to a one-digit figure in 2014or early 2010.''
Vietnam's central bank increased interest rates three times this year and this month raised the benchmark rate to 14%, the highest in Asia, from 12%. The State Bank of Viet Nam also devalued the dong by 2% this month to ease pressure on the currency.
Concern the government's measures to cool price increases have been ineffective roiled the Southeast Asian nation's financial markets, sending the benchmark stock index down 58% this year. Morgan Stanley said last month that Viet Nam may be headed for a ``currency crisis.''
``There have been difficulties in the financial and capital markets,'' said Dung. ``The economy also is exposed to the shortcomings and weaknesses'' of the global economy, he added, speaking via a translator.
Dung said the inflation rate for June would be ``about 50% lower than May's figure.'' Consumer prices increased 3.9% in May from the previous month. The General Statistics Office in Hanoi is expected to release figures for June this week.
The VN-Index of stocks has rose 8.64, or 2.3%, to 392.42 at 9:10 a.m. in Hanoi, extending gains this week to more than 7%.
Dung, who became prime minister two years ago, said that the country's ``top priority'' now is to slow inflation. The government on June 3 cut the economic growth target for this year to 7% from 9%.
Vietnam's inflation situation ``is totally out of control,'' Tom Cooley, Dean of New York University's Stern School of Business, said in an interview from Tokyo. ``They are going to face very painful choices as a result of letting it get that far out of control.''
The economy grew 6.7% in the first half of the year, Dung said today, after expanding 7.9% in the same period last year. Growth for all of 2007 was 8.5%, the fastest in more than a decade.
``In 2008, we also face of the problem of the increasing prices of commodities and high inflation in the world,'' Dung said. ``That is the reality. The Vietnamese economy is now very closely linked to the world economy.''
The U.S. lifted a trade embargo against Viet Nam in 1994 and resumed diplomatic relations in 1995, two decades after the end of the war. Vietnam in January 2007 became the 150th member of the World Trade Organization and a year later joined the United Nations Security Council.
Greenspan, who was chairman of the Federal Reserve from 1987 to 2006, ``advised Viet Nam to get prepared for the further changes and volatility in the world,'' Dung said.
``If the global and U.S. economy continue to slow down and oil prices will continue to increase, Viet Nam needs to have a solution to be prepared for that situation,'' Dung said.
``We are starting to see an improvement in inflation, but that's not to say this will be something that will be over and done with in a very short period,'' said Michael Pease, Hanoi- based general director of Ford Motor Co. in Viet Nam, which has invested $100 million in a car assembly plant near Hanoi.
In his meeting with Bush, Viet Nam agreed to a bilateral investment treaty with the U.S., ``which will help promote cross- border investment by significantly strengthening the legal protections'' under a trade agreement signed seven years ago, according to a release yesterday from the Department of State. (Bloomberg)
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