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Risk of deflation receding, says securities firm   2008-11-11 - Thanh Nien News

The risk of deflation this year or the next has reduced considerably with increased year-end economic activity and a loosening of its monetary policy by the central bank, according a Ho Chi Minh Citybased brokerage.


There are other signs for a positive outlook, says Sacombank Securities Co. (SBS), the securities arm of Saigon Thuong Tin Commercial Joint Stock Bank, in its latest report.

It expects this year’s inflation rate will be slightly over 20 percent.

The General Statistics Office (GSO) has said the monthly consumer price index (CPI) in October decreased by 0.19 percent for the first time in 18 months.

The trend in falling prices is also apparent in some major items in the CPI basket, like food and foodstuff, housing and construction materials, the report says.

“In fact, the price of these items started going down since September and notably, that of foodstuff began falling since as early as July 2008,” analysts from SBS said in the report.

“The negative CPI number in October has been certainly a highly welcome news after the hefty rises since the beginning of the year. It could thus be said that the brake has been effectively put on inflation. A new issue which has been raised recently is whether there is a possibility of deflation in the remaining months of 2008 and in 2009.

“We think there is less of a chance for that to happen as the economic activities will be busier at the year end, furthermore, a loosening monetary policy recently initiated by SBV will help boost economic activities and prevent deflation from taking effect.”

They also expect the country’s trade deficit at US$500 million per month for the remaining two months and the total gap for the year at $17.2 billion, 14 percent lower than the $20 billion target set earlier this year.

According to GSO, imports exceeded exports by $700 million in October, the fifth consecutive month that the trade gap has been kept at under $1 billion.

This has been a successful year for Vietnam in attracting foreign direct investment (FDI), SBS analysts say in the report, adding the FDI registration at $58.3 billion at the end of October, 2.73 times higher than last year’s figure, in spite of the global financial turmoil.

The disbursed amount stood at $9.1 billion, 13 percent higher than last year’s figure.

“The current financial mayhem will definitely impact the disbursement of FDI projects in 2009 and thereafter,” the report said. “However, we think the impact will not be clearly felt for this year’s current projects and the total disbursement for the year will be $10.5 billion.

“We have estimated FDI and ODA disbursement for the whole year to reach $10.5 billion and $2 billion respectively.”

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