Commerzbank reports that Vietnam's Consumer Price Index (CPI) for May 2024 rose to 5.6% year-on-year, marking the highest level since January 2020. This increase was primarily driven by elevated food and energy costs, which have been affected by supply disruptions linked to tensions in the Middle East. Despite the uptick, May's inflation figure came in slightly below the Bloomberg consensus expectation of 5.8% and was up from 5.5% in April. The average CPI for the first five months of 2024 was 4.3%, just under the State Bank of Vietnam’s (SBV) 4.5% target. Core CPI, which excludes volatile and administered prices, remained steady at 4.7%, unchanged from April [1].
Vietnam's trade deficit widened to a record USD 5.2 billion, attributed to strong import growth. This development highlights growing supply-side headwinds for the Vietnamese economy as inflation accelerates. In the foreign exchange market, the USD/VND pair rose 0.1% to 26,344, remaining relatively stable due to the SBV's consistent fixing rate over the past month. Year-to-date, the Vietnamese Dong has depreciated only 0.3% against the US Dollar, and the pair is 1.1% higher than its pre-conflict level [1].
Commerzbank notes that while inflationary pressures are mounting, they are mainly driven by higher energy prices, and there are currently no signs of second-order effects spreading through the economy. The overall outlook suggests that Vietnam is contending with significant supply-side challenges, but the central bank's policies have helped anchor the currency and keep inflation somewhat contained [1].
CONCLUSION
Vietnam is experiencing its highest inflation in over four years and a record trade deficit, primarily due to supply disruptions and rising energy costs. Despite these challenges, the Vietnamese Dong remains relatively stable, and inflation has not yet triggered broader economic effects. The market is closely watching for further developments as supply-side pressures persist.