The central exchange rate decreased by 77 VND, the VN-Index decreased by 3.12 points compared to the end of last week, or the consumer price index (CPI) in January 2024 increased by 3.37% compared to the same period in 2023... are some notable economic information in the week from January 29 to February 2.
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Overview
The consumer price index (CPI) in January 2024 increased slightly compared to the previous month. Many experts predict that inflation for the whole year will be controlled below the threshold allowed by the National Assembly, but there are still many potential risks.
According to the announcement of the General Statistics Office on CPI in January 2024, some localities increased medical service prices according to Circular No. 22/2023/TT-BYT, Vietnam Electricity Group adjusted the average retail electricity price and domestic rice prices continued to increase following export rice prices were the main reasons for the CPI in January 2024 to increase by 0.31% compared to the previous month. Compared to the same period in 2023, CPI in January increased by 3.37%; core inflation increased by 2.72%.
In the 0.31% increase in CPI in January 2024 compared to the previous month, there were 9 groups of goods and services with increased price indexes and 2 groups with decreased price indexes. The groups of goods and services with increased price indexes include the following main groups: The group of medicines and medical services increased the highest with 1.02% (causing the general CPI to increase by 0.05 percentage points); The group of housing and construction materials increased by 0.56%, causing the general CPI to increase by 0.11 percentage points, due to the price of household electricity in January 2024 increasing by 1.29% compared to the previous month and the demand for electricity for heating increased when the weather turned cold, gas prices increased by 1.69%; The group of transportation increased by 0.41%, causing the general CPI to increase by 0.04 percentage points; The group of food and catering services increased by 0.21%, causing the general CPI to increase by 0.07 percentage points; The culture, entertainment and tourism group increased by 0.11%, mainly focusing on package tourism products increasing by 0.7%; books, newspapers and magazines of all kinds increased by 0.43%; hotels and guesthouses increased by 0.13%.
Two groups of goods and services with price indexes decreasing are: Post and telecommunications group decreased by 0.05% due to companies implementing promotional programs to reduce prices for some types of mobile phones; Education group decreased by 0.12%, of which educational services decreased by 0.15%.
According to the General Statistics Office, the main reason is that on December 31, 2023, the Government issued Resolution No. 97/2023/ND-CP requiring tuition fees from the 2023-2024 school year to be kept stable at the same level as the 2021-2022 school year for public preschool and general education. Therefore, some localities have adjusted tuition fees down after collecting them according to Decree No. 81/2021/ND-CP.
Core inflation in January 2024 increased by 0.21% compared to the previous month and by 2.72% compared to the same period last year. According to the General Statistics Office, core inflation increased lower than the average increase of 3.37% mainly due to the price of medical services, which is a factor pushing up the CPI, but is a group of goods excluded from the calculation of core inflation.
Many experts predict that inflation in 2024 will only be around 3.2-3.5%. Agreeing with this opinion, the General Statistics Office commented that in terms of domestic factors, in 2023, many solutions will be actively implemented such as reducing lending interest rates, stabilizing the foreign exchange market; reducing value added tax from 10% to 8% from July 1, 2023; reducing environmental tax on aviation fuel; exempting, reducing, and extending taxes, fees, land use fees, and supporting businesses...
Therefore, inflation has been controlled, although it was quite high at the beginning of the year. The above solutions will continue to be implemented from the beginning of 2024, so inflationary pressure in the first months of this year is not as intense as last year and is likely to be maintained until the end of the year.
Regarding the world market, total demand this year is unlikely to increase sharply, making it difficult for raw materials and fuel prices, especially gasoline prices, to increase when the world economy, including leading economies such as the US, China, Europe, etc., is unlikely to increase sharply. In addition, central banks of leading economic countries in the world such as the US, EU, and UK have temporarily stopped raising policy interest rates, but currently, interest rates in these economies are still the highest in the past decades to control inflation and have not shown signs of a sharp decrease. High interest rates, reduced investment and consumption demand make it difficult for world inflation to increase as sharply as in 2023, supporting domestic inflation control.
However, there are still many factors that put pressure on domestic inflation. Geopolitical tensions continue to escalate, disrupting the world's vital transportation routes, causing shipping costs and logistics costs to increase sharply. At that time, even if the demand for raw materials and consumer goods decreases, prices may still increase. The impact of climate change and extreme weather causes food shortages, putting pressure on world food prices. Although Vietnam is a country that can take control of its own food, rising world market prices can also push up domestic prices.
Regarding domestic factors, in 2024, Vietnam Electricity Group (EVN) and the Ministry of Industry and Trade have planned to submit to the Government a plan to continue increasing electricity prices, plus two price increases in 2023, which will strongly impact the CPI, especially in the summer months, when electricity demand increases due to hot weather.
Tuition fees for the 2023-2024 school year in the public sector will not increase temporarily according to Decree 81/2021/ND-CP, but may increase for the 2024-2025 school year if inflationary pressures are not high. In addition, in 2024, the new salary reform and the increase in the regional minimum wage (up 6%) will occur at the same time on July 1, 2024, creating inflationary pressures, for example, hospital fees for public facilities will increase when implementing salary reform.
Domestic market summary from January 29 to February 2
In the foreign exchange market during the week of January 29 to February 2, the central exchange rate was adjusted down sharply by the State Bank of Vietnam in all sessions. At the end of February 2, the central exchange rate was listed at 23,959 VND/USD, down 77 VND compared to the previous weekend session.
The State Bank of Vietnam's transaction office continued to list the USD buying price at 23,400 VND/USD, while the USD selling price at the end of the week was listed at 25,106 VND/USD, 50 VND lower than the ceiling exchange rate.
The interbank USD-VND exchange rate fell again last week. At the end of the session on February 2, the interbank exchange rate closed at 24,340 VND/USD, a sharp decrease of 258 VND compared to the session at the end of the previous week.
The dollar-dong exchange rate on the free market fluctuated in a downward trend last week. At the close of the session on February 2, the free exchange rate dropped sharply by 260 VND for buying and 250 VND for selling compared to the previous weekend session, trading at 24,805 VND/USD and 24,865 VND/USD.
In the interbank money market from January 29 to February 2, interbank VND interest rates increased sharply in all terms. Closing on February 2, interbank VND interest rates were trading around: overnight 1.41% (+1.23 percentage points); 1 week 1.71% (+1.41 percentage points); 2 weeks 1.84% (+1.31 percentage points); 1 month 1.91% (+0.78 percentage points).
Interbank USD interest rates increased slightly in all terms. At the end of the week on February 2, the interbank USD interest rate closed at: overnight 5.17% (+0.04); 1 week 5.28% (+0.04 percentage points); 2 weeks 5.32% (+0.02 percentage points) and 1 month 5.40% (+0.01 percentage points).
In the open market from January 29 to February 2, in the mortgage channel, the State Bank bid for 7-day and 14-day terms, with a volume of VND5,000 billion, with interest rates at 4.0%. There were VND2.28 billion in winning bids, so the State Bank net injected VND2.28 billion into the market.
The State Bank of Vietnam continued not to offer State Bank bills for auction last week. There are no more bills circulating on the market.
On the bond market on January 31, the State Treasury called for bids for VND10,000 billion of government bonds. The winning bid volume was VND3,007 billion (equivalent to a winning rate of 30%). Of which, the 5-year term mobilized VND350 billion/VND3,500 billion of the call; the 10-year term mobilized VND1,542 billion/VND3,000 billion; the 15-year term mobilized VND950 billion/VND3,000 billion and the 30-year term mobilized VND165 billion/VND500 billion. The winning interest rate for the 5-year term was 1.39% (unchanged compared to the previous auction), 10-year was 2.28% (+0.08 percentage points), 15-year was 2.48% (+0.08 percentage points) and 30-year was 2.85% (unchanged).
This week, on February 7, the State Treasury offered VND8,000 billion in government bonds, of which VND2,000 billion was offered for the 5-year term, VND3,000 billion for the 10-year term, VND2,500 billion for the 15-year term, and VND500 billion for the 20-year term.
The average value of Outright and Repos transactions in the secondary market last week reached VND14,039 billion/session, a sharp increase compared to VND9,440 billion/session of the previous week. Government bond yields last week fluctuated slightly for terms of 5 years or more. At the close of the session on February 2, government bond yields traded around 1 year 1.12% (unchanged); 2 years 1.14% (unchanged); 3 years 1.19% (unchanged); 5 years 1.42% (+0.02 percentage points); 7 years 1.83% (+0.01 percentage points); 10 years 2.30% (+0.02 percentage points); 15 years 2.52% (+0.04 percentage points); 30 years 3.04% (+0.03 percentage points).
The stock market continued to increase and decrease alternately during the week from January 29 to February 2. At the end of the week on February 2, VN-Index stood at 1,172.55 points, down 3.12 points (-0.27%) compared to the previous weekend; HNX-Index increased by 1.13 points (+0.49%) to 230.56 points; UPCoM-Index inched up 0.67 points (+0.76%) to 88.37 points.
Market liquidity remained low, although it increased slightly compared to the previous week, with trading value increasing to VND18,600 billion/session compared to VND15,700 billion/session the previous week. Foreign investors net sold more than VND1,205 billion on all three exchanges.
International News
The International Monetary Fund (IMF) has raised its outlook for the world economy in 2024. In a report released on January 30, the IMF expects global GDP to grow by 3.1% in 2024 (+0.2 percentage points compared to the October 2023 forecast). The main reason is that the outlook for the US and China has changed.
Specifically, the organization forecasts that among developed countries, the US GDP in 2024 will increase by 2.1% (+0.6 percentage points), but the Eurozone will only increase by 0.9% (-0.3 percentage points), Japan will increase by 0.9% (-0.1 percentage points) and the UK will increase by 0.6% (unchanged). For developing countries, China's GDP is forecast to increase by 4.6% this year (+0.4 percentage points), India will increase by 6.5% (+0.2 percentage points).
Accordingly, the IMF believes that the risk of a global "hard landing" is decreasing over time, despite new risks arising in the Middle East causing disruptions in supply chains and rising commodity prices.
On inflation, the IMF forecasts the global consumer price index to increase by 5.8% in 2024 (unchanged), continuing to decelerate compared to 6.8% in 2023.
The Fed left its policy interest rate unchanged at its first meeting of 2024, while the US also recorded a number of important economic indicators.
At its meeting on January 31, the Fed noted that the US economy has grown quite rapidly recently. Inflation has shown a slowdown throughout 2023, but remains high. The Fed showed its determination to achieve full employment and return inflation to 2.0% over the long term.
Accordingly, the agency decided to keep the policy interest rate unchanged at 5.25% - 5.50% in this meeting to achieve the above target. The Fed also affirmed that it will continue to carefully evaluate economic and inflation data in the coming time to make appropriate decisions on monetary policy.
In addition, the Fed is also ready to change its stance on monetary policy if risks arise that hinder the achievement of the inflation target.
Regarding the US economy, the Institute for Supply Management (ISM) said the manufacturing PMI index in the country was at 49.1% in January, up from 47.4% the previous month, contrary to the forecast of a slight decrease to 47.2%.
In the labor market, the US created 353 thousand new non-farm jobs in January, higher than the 333 thousand in November and also higher than the forecast of 187 thousand. The unemployment rate in January was flat at 3.7%, contrary to the forecast of experts to increase slightly to 3.8%. Average hourly earnings of US people also increased by 0.6% m/m in January, following the previous month's 0.4% increase, also higher than the expected increase of 0.3%.
Following the Fed and the ECB, the Bank of England (BoE) also left its policy interest rate unchanged at its first meeting of the year. At its meeting on February 1, the BoE said that the UK's GDP would gradually recover in the coming period after the slowdown in the previous period due to the high interest rate environment. The labor market is gradually loosening, but is still considered tight compared to history. UK inflation in December 2023 fell to 4%, lower than expected in the BOE's November report.
Accordingly, the BoE predicts that inflation will continue to decline to the target of 2.0% in the second quarter of 2024, then increase again in the third and fourth quarters. CPI for the whole of 2024 may increase by about 2.75%. At this meeting, the BoE decided to keep the policy rate unchanged at 5.25%, aiming to bring inflation to the target level in a reasonable time. The agency also affirmed that it will continue to closely monitor signs of inflation and the economy to decide how long to maintain the policy rate at the current level.
On the UK economic front, the S&P Global UK Manufacturing PMI for December was revised down to 47.0 from 47.3 in the preliminary survey. UK house prices rose 0.7% month-on-month in January after remaining flat the previous month, beating forecasts for a 0.1% rise.
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