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Petrol prices in Vietnam may increase by 30% in the coming months

VinaCapital’s chief economist worries that rising gasoline prices in the coming months may have a significant impact on inflation and economic growth.

VinaCapital’s chief economist, Michael Kokalari, recently said that the Russia-Ukraine conflict is a shock in the international financial market and has had a lot of impact on commodity prices.

However, the expert assessed the impact of the above conflict on the Vietnamese economy. The biggest risk is that rising oil and commodity prices could increase Vietnam’s inflation by 1-2 percentage points.

We are also concerned about the possibility that a sudden increase in the value of the USD could cause the VND to depreciate 1-2% against the USD“, added the expert.

Experts VinaCapital cited the relatively small economic relations between Vietnam and Russia. The export value to Russia is only about 3.2 billion USD, less than 1% of Vietnam’s total import and export turnover. Russian tourists account for less than 4% of tourists to Vietnam.

Vietnam imported about 145 million USD of fertilizer from Russia last year, less than 10% of the fertilizer used in the country. While Vietnam’s fertilizer industry is quite developed with two large listed companies, Phu My Fertilizer and Ca Mau Fertilizer, with total revenue of nearly 1 billion USD.

About 10% of Vietnam’s coal imports are from Russia. The country is also the third largest coal supplier to Vietnam, after Australia and Indonesia.

Vietnam produces significant amounts of oil, natural gas and coal, yet is still a net importer. The high oil price will partly affect GDP growth this year.

Experts from VinaCapital concluded that Vietnam’s economy will be hampered by high energy prices and a delay in fully opening up to tourism. Vietnam’s GDP growth in 2022 will reach 6.5%, down 1 percentage point compared to the previous forecast.

Petrol prices in Vietnam may increase by 30% in the coming months-1
Mr. Michael Kokalari forecast gas price in the country will increase by 30% in the coming months. Photo: VinaCapital.

Mr. Michael Kokalari also predicted that Vietnam’s inflation will increase slightly this year, mainly due to higher oil prices.

The world oil price increased by nearly 40% after the Russia-Ukraine tension and at one point increased by nearly 70% compared to the beginning of the year before falling again. The retail price of petrol in Vietnam has increased by nearly 20% compared to the beginning of the year at the time of the conflict“, he said.

VinaCapital expert acknowledged that the domestic oil price has lag but basically still follows the world price. Therefore, he forecast gasoline prices in Vietnam could increase by 30% in the coming months.

If that happens, Vietnam’s inflation will increase by about 1.5 percentage points. Petrol prices account for 3.6% of Vietnam’s CPI basket and also have indirect effects on other commodities to push inflation.

VinaCapital forecasts that Vietnam’s inflation will fall about 3% this year, lower than the Government’s target of 4%. In fact, the report from the General Statistics Office showed that the CPI in February increased by 1.42%.

This is because the prices of other basic commodities do not affect CPI Vietnam too much such as wheat and industrial metals.

Specifically, the price of wheat has increased by about 50% since the war between Russia and Ukraine. However, wheat and other grains contribute a very small proportion to Vietnam’s CPI basket.

While rice, which accounts for more than 3% of Vietnam’s CPI, has barely changed in recent weeks. About 20% of the cost of rice production is fertilizer, but fertilizer prices in Vietnam have not fluctuated much.

Industrial metal prices have increased around the world, but steel prices in Vietnam – the most important industrial metal in Vietnam – have only increased by about 6% since the conflict.

According to Zing

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