Vietnamese inflation slows to lowest level in more than a year


Inflation slowed in February for a sixth month,
dropping to the lowest level in more than a year as the global economic
slowdown reduced food and transportation costs.


Prices rose 14.8 percent in February from the same
time a year earlier, the slowest rate since January 2008, according to
preliminary figures from the General Statistics Office in Hanoi. That’s
down from a 17.5 percent year-on-year rate in January.


The figure has been cut almost in half since August,
and the government has now shifted its focus from fighting inflation to
trying to prevent a sharp economic slowdown. The latest figures suggest
that monetary authorities have room to cut interest rates further and
to inject money into the economy in a bid to revive faltering growth
prospects.


“Vietnam’s inflation numbers are still going to be
elevated relative to elsewhere in the world,” said James McCormack,
head of Asia sovereign ratings at Fitch Ratings in Hong Kong. “But the
overriding concern for the Vietnamese now, as for policy makers
everywhere else in Asia, is to stimulate growth.”


On a monthly basis, prices rose 1.2 percent in February from January, the biggest month-on-month increase since August.


“Inflation is not likely to be a problem for the next
six months, but in a country like Vietnam, it could come back in 12
months,” said Adam McCarty, Hanoi-based chief economist at Mekong
Economics Ltd. “It may not slow much more. Global commodity prices have
stopped falling sharply.”


Overall food prices went up 22.2 percent year on year
this month, down from a corresponding 27.6 percent increase in January.
While Vietnamese rice prices have increased recently, the gains have
trailed behind those in Thailand, according to a February 11 report
from the US Agriculture Department. Thailand is the world’s biggest
rice exporter, while Vietnam was second last year.


Vietnam vs Thailand


Vietnam’s prices this month were US$172 per ton below quotes for comparable grades of rice from Thailand, according to the US.


“After nearly tripling to record highs from November
2007 to May 2008, global trading prices have dropped sharply,” the
Agriculture Department said in another report dated February 17.


“The sharp decline in prices has largely been due to
the removal of export restrictions by some countries, expectations of
record global production, a stronger dollar, and impacts from the
global financial crisis and economic slowdown,” the US said.


Prices in the category including transportation rose
1.3 percent yearon-year, down from a 2.9 percent rate in January.
Global crude oil prices have averaged about 59 percent less this month
to date than in the same period a year earlier.


Prices in the category including construction rose 6.5 percent from a year earlier