Commerzbank highlights that Vietnam’s May Consumer Price Index (CPI) rose to 5.6% year-on-year, the highest since January 2020, driven by food and energy costs, while the trade deficit widened to a record USD 5.2 billion on strong import growth. Despite these supply-side pressures, USD/VND remains relatively anchored by a stable State Bank of Vietnam (SBV) fixing, with the Dong down only 0.3% versus the Dollar year-to-date.

Higher CPI and record trade deficit

"May inflation came in slightly below expectation at 5.6% yoy (Bloomberg consensus: 5.8%) vs 5.5% in April, marking the highest reading since January 2020. CPI averaged 4.3% in the first five months of the year, slightly below the State Bank of Vietnam’s (SBV) 4.5% target."

"Elevated food and energy prices drove the increase as these items faced supply disruptions linked to Middle East tensions. Core CPI, which excludes volatile and administered prices, was steady at 4.7%, unchanged from April."

"In FX, USD/VND rose 0.1% to 26,344 yesterday. The pair remains anchored by a stable SBV fixing rate in the past month. Nonetheless, the pair is still 1.1% higher than its pre-conflict level. Year-to-date, the VND is down 0.3% vs the USD."

"Overall, the economy faces growing supply-side headwinds as inflation quickens. On a bright note, inflationary pressures remain primarily driven by higher energy prices, and signs of second-order effects have not emerged yet."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)