Pork shortage could accelerate Vietnam’s 2020 inflation rate to 5.7%

Pork shortage has been gripping the country following months of excess pork supply due to panic slaughtering of the herd, which has the effect of depressing prices.

The provider of credit, debt market, and macro intelligence solutions believes that the existing pork supply shortage is likely to persist over 2020. This would also put upside pressure on the prices of other animal protein.

In 2021, Vietnam’s average inflation world be 4.2%, mainly on the back of food inflation, far above 2.2% in the US for both years. Pork production is likely to only recover somewhat closer to 2023.

The forecast on the elevated inflation overshoots the State Bank of Vietnam’s 4.0% limit. The central bank is seen to adopt targeted loosening measures to boost growth of the economy’s priority sectors.

Inflation surged to 5.2% year-on-year in December 2019, from 3.5% in November 2019 on the back of surging food inflation which account 40% of the inflation basket.

Food inflation almost doubled to 9.2% in December 2019, from 5.6% in November 2019, on the back of rocketing pork prices due to the outbreak of African Swine Fever, which has affected all 63 provinces.

High inflation would also weigh on Vietnam’s export competitiveness in addition to incentivizing imports, which combined, would pressure the dong weaker over the long run.

The organization forecast credit growth in Vietnam to stabilize at 12.5% in 2020 versus 12.1% last year. The economy’s 2019 credit growth came in at just 12.1%, underperforming the State Bank of Vietnam’s 14% target for the year.

This marked a second year of deceleration since credit growth peaked at 18.2% in 2017.

► Vietnam’s 2019 CPI seen to hit 3-year low at 2.73% despite soaring pork prices