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Expert predicts inflation at single-digit rate in 2012

A high-profile securities expert predicted next year’s inflation to return to the single-digit rate from 20 percent or so at this year’s end, as the monetary tightening policy paid off.

Fiachra Mac Cana, managing director and head of research of the Hochiminh City Securities Co. (HSC), told a meeting with investors last Friday that 2012 inflation would be around 10 percent or so, as money supply has been choked off and the pressure on price increase has abated.

The global growth is slowing down so there is no much pressure on prices, and furthermore, the credit growth and money supply growth have come down substantially this year, he said.

According to the central bank, by late August, the credit growth was 8.85 percent and the money supply growth was 9.16 percent from late last year, much lower compared to the growth of 16.9 percent and 16.4 percent respectively at the same period last year.

Earlier, the central bank had set this year’s credit growth and money supply growth targets at low levels of around 18 percent and 16 percent respectively.

Experiences seen between 2006 and 2010 show that there was close correlation between credit growth and inflation. So, as the credit growth is coming down, the inflation should follow, “so my forecast for next year is much lower at 10 percent,” Mac Cana said.

Regarding factors behind the inflation in the rest of this year, the expert said key constituents of the consumer price index including food, building materials, consumer goods, and transportation have come down strongly in the last two months.

Therefore “I think month-on-month inflation can be capped at less than 1 percent for the remaining months of the year,” said Mac Cana. However, he expected inflation rate would be still high at the end of this year, around 20 percent, having peaked at over 22 percent in end-August.

The stock expert suggested that inflation rate would come down slowly in the rest of this year before settling down strongly in the first half next year. He therefore forecast the interest rate to make the same move, going down by two percentage points from the current level by the year’s end and hit around 12 percent-14 percent next year.

From SaigonTimes

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