Oil price decline gives Vietnam room to relax monetary policy

Saturday, 2015-02-07 17:44:32
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NDO - Falling global oil prices can help Vietnam bring down inflation further, making room for a looser monetary policy, Dr Luong Van Khoi at the National Centre for Socio-Economic Information and Forecast was quoted as saying by the Voice of Vietnam.

Citing a prediction by the International Energy Agency that oil prices will stay at US$56.88 a barrel in 2015, Dr Khoi expected the Vietnamese economy to grow between 5.5 and 5.7% with inflation running at 2.7%.

He said with those predictions in mind, Vietnam has a large space to relax its monetary policy in order to bolster growth while still keeping inflation in check under 5%.

According to Dr Khoi, the oil price at US$50 will slash more than VND3.1 trillion (US$145.7 million) from Vietnam’s tax revenues and US$0.5 billion in its foreign reserves, however other revenues can offset these reductions.

He elaborated that the fall in oil prices will drive down costs for input materials and output prices, stimulate consumption and boost growth, culminating in higher Government revenues.

Dr Khoi stated that oil prices would be unlikely to fall further but will linger around US$50-56 a barrel in 2015, adding that Vietnam’s economic growth rate will increase by 0.78 percentage points with oil prices at US$50 a barrel.

The growth rate could be higher if oil prices were lower, rising by 0.91 and 1.04 percentage points if prices fell to US$40 and US$30 respectively, the expert said.