Vietnamese inflation slowed in March for a seventh month, helped by tighter limits to credit growth and a moderation in food prices, providing scope for more monetary easing to boost growth.
Consumer prices rose 14.15 percent in March from a year earlier, the General Statistics Office said in Hanoi Saturday, compared with a 16.44 percent pace in February. It is the slowest pace of increase since March 2011. Prices rose 0.16 percent from February.
Weakening inflation gave Vietnam's central bank scope to cut interest rates this month as higher oil prices and Europe's slump threaten expansion. While a single-digit goal for this year "is very challenging," the pace of price gains is coming under control and the economy is stabilizing, Deputy Minister of Trade and Industry Hoang Quoc Vuong said earlier this month.
"Slower inflation provides greater real purchasing power for consumers and the possibility of more monetary policy easing, both of which provide a boost for economic growth," Matt Hildebrandt, a Singapore-based economist at JPMorgan Chase & Co., said before the report.
Vietnam's inflation is still the fastest in a basket of 17 Asia-Pacific economies tracked by Bloomberg, and higher fuel prices may pose a risk to the country's outlook for price gains, according to Australia & New Zealand Banking Group Ltd., which rates the nation as the second-most vulnerable among Asian emerging markets to an oil supply shock.
The price of the most commonly used fuel grade in Vietnam was raised by 10 percent earlier this month. Still, oil-driven costs are a relatively small portion of the inflation basket, according to Hildebrandt.
"Higher oil prices may slow the pace of decline in year- on-year inflation, but they aren't going to reverse the direction," he said.
The Vietnamese government has been trying to regain investor confidence after credit downgrades and currency devaluations over the past two years. The nation is also struggling with a trade deficit and a credit crunch in its banking system.
Slowing inflation makes bank deposits more attractive, and should shift dollar and gold savings into dong, boosting currency stability and foreign-exchange reserves, Hildebrandt said.
"It is good for investor confidence," he said. "Greater macroeconomic stability in Vietnam all starts with slower inflation."