Vietnam Annual Inflation Slows a Second Month on Fuel Prices

By Jason Folkmanis

Oct. 25 (Bloomberg) -- Vietnamese annual inflation slowed for a second month in October, eased by fuel-price cuts and the reluctance of local banks to make loans. The monthly inflation rate declined for the first time since March 2006.

Consumer prices climbed 26.7 percent in October from the same time a year earlier, according to figures released today by the General Statistics Office in Hanoi. Year-on-year inflation in September was 27.9 percent. On a monthly basis, prices fell 0.2 percent in October from September, the first decline in two-and-a-half years.

Inflation has seen ``a vast improvement from earlier in the year,'' DWS Vietnam Fund Ltd. said in a note sent to investors on Oct. 23.

On Oct. 21, the State Bank of Vietnam cut its key interest rate to 13 percent from 14 percent, with HSBC Holdings Plc saying the bank was encouraged by evidence of slowing inflation. U.S. Federal Reserve Chairman Ben S. Bernanke and the heads of six other central banks said this month that global inflationary pressures are moderating amid a financial crisis.

``The world is changing quickly,'' said Alain Cany, the Ho Chi Minh City-based chairman of the European Chamber of Commerce in Vietnam, in an Oct. 20 telephone interview. Vietnam ``may not have to fight inflation so much by themselves. Commodity prices are coming down.''

Prices in the category including transportation rose 24.8 percent from a year ago, down from a 26.1 percent annual rate in September, and fell 0.9 percent from September. The price of 92-RON gasoline, the country's most commonly used grade, is now at 15,500 dong ($0.92) per liter, down from 17,000 dong at the beginning of the month.

Food Prices

Food prices rose 40.6 percent year-on-year, down from a 42.7 percent annual rate in September. On a monthly basis, food prices fell 0.4 percent from September, with prices in the sub- category including rice declining 1.9 percent.

Export prices for Vietnam's top-quality rice grade fell 15 percent in the week ending Oct. 7 from a month earlier, according to the U.S. Agriculture Department. ``Global rice prices continue to decline,'' the Agriculture Department said in a report this month.

Prices in the category including construction materials rose 22.8 percent, down from a 26.1 percent year-on-year rate in September, and declined 1.1 percent on a monthly basis.

Local companies are having difficulty securing financing after a rise in interest rates earlier in the year and amid a government focus on keeping credit expansion in check, the U.K.-listed fund Vietnam Holding Ltd. said this month. ``Inflation has responded to policy changes,'' Vietnam Holding said.

Vietnam's inflation rate in August reached 28.3 percent, the highest year-on-year level since at least 1992, according to figures from the General Statistics Office in Hanoi.

To contact the reporters on this story: Jason Folkmanis in Ho Chi Minh City at folkmanis@bloomberg.net