The report also forecasts that Viet Nam's economic growth this year will be 6.3 per cent if oil prices average roughly US$60 per barrel throughout the year. — VNA/VNS Photo Ngoc Ha

HA NOI (Biz Hub) — Inflation this year will fluctuate at about 3 per cent due to adjustments in public services, taxes and fees, the Viet Nam Institute for Economic and Policy Research (VEPR) has forecast.

If no price hike is seen in public services, such as health care and education, environment protection taxes and road fees, the inflation rate will be about 1 per cent, the institute has predicted in its latest report.

The report further says that prices of basic commodities are likely to continue to decrease from now until the end of the year, however, a significant change in oil prices will cause pressure on inflation.

As for foreign exchange rates, the report forecasts that the central bank could adjust the dollar/dong exchange rate up 2 per cent, as planned this year. The adjustment, if it is taken, will be in the final quarter of this year. In January 2015, the SBV devalued the dong by 1 per cent, from VND21,246 to VND21,458 per US dollar, which was the first exchange rate adjustment since June 2013.

The report also forecasts that Viet Nam's economic growth this year will be 6.3 per cent if oil prices average roughly US$60 per barrel throughout the year.

Lower oil prices, however, may cause a State budget deficit higher than expected, the report says, estimating that this year's budget deficit will be roughly VND45 trillion ($2.08 billion), or roughly 6-6.5 per cent of GDP if oil prices average $60 per barrel.

Such a deficit will force the Government to cut investment spending this year, the same as in 2014, VEPR warns.

It also forecasts that the country will have a trade deficit this year, after three consecutive years of trade surpluses, however, the overall balance will remain as a surplus thanks to an offset from foreign direct investment (FDI) capital and overseas remittance flows.

Also in the report, the institute has recommended the Government make a breakthrough in its policy reforms and actively create favourable conditions for private enterprises.

Of note, new policies should be mapped out to create a fair investment environment for all economic sectors. — VNS