A decade of low inflation
At the beginning of 2024, there were not many optimistic forecasts about Vietnam's economic prospects when GDP only increased by 5.66% in the first quarter of 2024, while CPI in March 2024 increased by 3.97% over the same period last year.
In addition, the economy also faces many challenges from geopolitical conflicts in Ukraine and the Middle East, the trend of increasing freight rates and especially the strengthening of the USD in the world market, putting great pressure on exchange rates, interest rates and inflation in Vietnam. Despite facing many difficulties, since the second quarter of 2024, the economic picture has gradually become brighter.
At the Workshop on Market and Price Developments in Vietnam in 2024 and Forecast for 2025, held on January 9, Associate Professor, Dr. Nguyen Dao Tung - Director of the Academy of Finance assessed that the impressive recovery of exports and industrial production has helped GDP growth in the following quarters tend to be higher than the previous quarter.
"Year-on-year inflation tends to decrease after peaking at 4.45% in May 2024. As a result, by the end of 2024, Vietnam has achieved the dual target with GDP growth reaching 7.09% (exceeding the target of 6 - 6.5%), while the average CPI increased by only 3.63% compared to the previous year, much lower than the target approved by the National Assembly of 4 - 4.5%. This is also the 10th consecutive year that Vietnam has succeeded in controlling inflation at below 4%" - Associate Professor, Dr. Nguyen Dao Tung assessed.
Inflation scenario in 2025
In addition to currency and exchange rate factors, inflation in 2025 also depends on other factors such as world economic growth and oil prices and input material prices. According to forecasts from international organizations, the world economy in 2025 will still grow steadily at 3.2%, equivalent to 2024, while oil prices and prices of basic input goods, on average, tend to decrease slightly. However, exchange rates and interest rates will be uncertain factors and will affect prices in Vietnam.
Dr. Nguyen Duc Do - Deputy Director of the Institute of Economics and Finance, Academy of Finance forecasts that there are 3 inflation scenarios to consider in 2025.
"In the baseline scenario, the USD/VND exchange rate is stable and interest rates increase only slightly due to increased credit demand, the CPI is forecast to increase by an average of 0.23%/month and the average inflation for the whole year of 2025 will be around 3.0%.
In the high scenario, the exchange rate pressure is large due to the strong appreciation of the USD in the world market, while the State Bank of Vietnam increases interest rates to stabilize the exchange rate and control inflation, the CPI may increase by 0.28%/month and the average inflation will be around 3.3%.
In the low scenario, the world economy and Vietnam grow weakly, oil prices decrease significantly, while the USD price and interest rates are stable or decrease slightly, the CPI may increase only 0.18%/month and average inflation will be around 2.7%.
The above forecasts do not take into account the possibility that the Government will increase the prices of medical and educational services according to the roadmap, as well as the possibility that the world economy will fall into recession due to interest rates in developed countries remaining high for a long time.
If the Government adjusts service prices in the second half of 2025, average inflation could be at 3.5% in the high scenario. For the low scenario, in case the world economy falls into recession in 2025 and oil prices fall sharply, average inflation could fall to 2.5% or even lower," Dr. Nguyen Duc Do predicted.
