Vietnam's headline inflation is expected to remain below 1 percent in the next five months, before rising to 2.8 percent year-on-year by the end of 2015, HSBC said in a new report.
According to the bank, domestic demand is rebounding, albeit at a gradual pace.
Retail sales expanded 13 percent year-on-year in February while imports also rose 16.3 percent over early this year, said the report.
Inflation will gradually trend upward in the second half of this year on higher social spending costs, a potential electricity hike, stronger economic activity and an unfavorable base effect, the bank said.
The government has decided to raise power prices by 7.5 percent, starting March 16.
HSBC said even when inflation picks up, it will remain well within the government’s target of less than 5 percent for 2015.
In February, inflation rose a meager 0.3 percent year-on-year, a slowdown from an already low January figure of 0.9 percent.
HSBC suggests that the central bank may create looser credit conditions by lowering the open market operations rate by 50 basis points to 4.5 percent by the end of the year to lower funding costs.