Vietnam needs to monitor inflation closely: World Bank

The Consumer Price Index (CPI) rose from 3% in August to 3.7% in September, continuing a sharp upward trend that started in June, the bank said in its latest update on Vietnam.

Inflation was due to higher prices of food and foodstuffs as well as housing and construction materials.

Another contributing factor is the rising price of transportation services which was stimulated by a new round of oil price hikes in the third quarter.

The price of education services also rose by 7.6% year-on-year in September following a government decree to adjust the tuition fees of public higher education institutions.

"A sharp upward trend in headline inflation continues to warrant a close watch," the World Bank said.

Although economic growth picked up in the third quarter (a 5.3% increase compared to the second quarter’s 4.1%), domestic consumption remained subdued and credit growth continued to be slow, reflecting weak private domestic investment and investor confidence.

Credit growth decelerated from 9.4% year-on-year in August to 8.7% in September, falling further below the pre-Covid level.

The deceleration, amid ample market liquidity and a lower interest rate environment, shows the continued slump in demand for consumer credit, housing, and investment activities by the private sector.

But disbursement of public investment in the first nine months was 45% higher year-on-year.

"Continued efforts to implement public investment could support aggregate demand and economic growth in the short run," the World Bank said.

Further improving the business environment and stepping up investment in human capital could help the country attract high-tech and high-value-addition foreign direct investment and boost productivity in the long run, it added.