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Banking news: Rising core inflation putting pressure on the SBV's monetary policy

Banking news: Rising core inflation putting pressure on the SBV's monetary policy

Thursday 08, 12 2022
Vietnam’s core CPI maintained a strong upward trend from the second quarter and officially surpassed the total CPI from the middle of the third quarter. BSC believes that the increasing core inflation is still putting pressure on the monetary policy of the State Bank.

Increasing core CPI

In the newly released macro report, BIDV Securities Joint Stock Company (BSC) maintains its forecast that the CPI at the end of 2022 will reach 4% in the positive scenario and 4.8% in the negative scenario. Key assumptions include the average Brent oil price hovering around the threshold of USD 80-100/barrel, the price of porks traded in the region ranging from VND 70,000 to 80,000/kg and food prices increasing again by the end of 2022.

Core CPI (excluding food, fresh foods, energy and health and education services) increased by 4.81% year-on-year in November, which means the 11-month average is 2,38%. Core CPI maintained a strong upward trend from the second quarter and officially surpassed the total CPI from the middle of the third quarter. BSC believes that the increasing core inflation is still putting pressure on the monetary policy of the State Bank.

Vietnamcredit Core inflation

Consumer demand expected to increase in the last month of the year

Analysts also raised the expectation that consumer demand will increase in the last month of the year.

"Although the domestic commodity market is affected by the world market as the prices of some goods (especially energy products, etc.) tend to increase according to world commodity prices, in general, the demand for domestic service goods still have a positive growth compared to last year", BSC said.

BSC assesses that year-end consumer demand can grow well thanks to holiday shopping.

Vietnamcredit Accumulated retail

In the first 11 months of the year, the total retail sales of consumer goods and services reached VND 5.18 million billion, up 20.5% over the same period. The travel and tourism segment experienced the strongest growth rate of more than 300%.

In November, the total increase was 2.58% compared to the previous month, of which retail increased by 2.63%, accommodation and catering services increased by 2.78% thanks to events like Teacher’s day or Black Friday.

Meanwhile, November's PMI reached 47.4 points, which was below 50 for the first time in more than two years due to falling demand (mainly from the export sector) causing the number of new orders and output to fall; high exchange rate makes input materials more expensive. Employment also decreased when businesses try to save costs. Besides, selling prices also decreased in the context of reduced demand.

Employment situation tends to decrease

In the first 11 months of 2022, the number of newly registered enterprises increased by 30.44% over the same period and the number of enterprises returning to operation increased by 40.48%. At the same time, the number of enterprises temporarily suspending operations and completing dissolution procedures also increased.

Employment of industrial workers increased by 5.86% over the same period (processing and manufacturing decreased by 0.08%). BSC believes that the increase in the employment index has decreased in recent months.

Vietnamcredit Employment situation

“In the context of a less positive world macro situation and tightened domestic monetary policy, many domestic enterprises faced difficulties due to the scarcity of input materials, the number of orders decreased due to the decrease in demand, causing the labor demand to go down in recent months. Many businesses have had to cut working hours or even cut workers", BSC experts said.

 

Source: BSC

Compiled by VietnamCredit

 

Categories
Banking & Finance

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