Vietnamese inflation slowed for a fourth month to the lowest level since March, eased by tumbling oil prices and slumping demand for products such as steel.

Consumer prices rose 19.9% in December from a year earlier, according to figures released today by the General Statistics Office in Hanoi. The annual inflation rate was 24.2% in November and in August reached 28.3%, the highest since at least 1992. On a monthly basis, prices fell 0.7% in December, the third straight decline.

Vietnam’s government cut petrol prices twice this month, adding to a series of reductions since August that have left the most commonly used grade of gasoline 42% cheaper. The Vietnamese central bank has adjusted its goal from containing inflation to boosting economic growth, fund managers Indochina Capital Advisors Ltd. said this month.

“The inflation concern is fading,” said Yuichi Izumi, an economist at Nomura Securities in Tokyo. “Rice prices are declining, and there are economic problems outside Viet Nam easing inflation pressures. The rate should be quite limited going forward.”

Prices in the overall food category climbed 31.9% from a year earlier, down from a 37.6% year-on-year rate in November. Prices in the category including rice were 43.3% higher than last year, down from a 51.1% rate in November. On a monthly basis, prices in the rice category fell 2.4% in December.

‘Record Crops’

“Several major exporters and importers are expected to harvest record crops,” the U.S. Agriculture Department said last week in a monthly rice outlook report. “Global trading prices continue to decline.”

Prices in the category including transportation rose 6.6% from a year earlier, slowing from a 19.3% rate in November. They fell 6.8% month-on-month.

Prices in the category including construction materials rose 8.5% from a year ago, down from a 14.7% annual rate in November. On a monthly basis, prices in the category declined 2.4% in December from November.

Vietnamese steel companies are facing difficulties due to sliding demand, with the government using higher import tariffs to allow producers to clear stockpiles, the Viet Nam Steel Association said last week. Vietnamese property projects are short of working capital, economist Scott Robertson of Dragon Capital in Ho Chi Minh City wrote in a note last week.

Property Funds

“Problems at home have affected Korean developers,” that were investing in Viet Nam, wrote Robertson. “Many of the other foreign property funds that raised capital in 2006-2007 and binge-invested in land banks are now capital-constrained with little access to more.”

Slowing inflation has allowed the country’s central bank to cut its benchmark interest rate by 550 basis points since October to 8.5%, with Izumi of Nomura expecting the rate to fall to 7% by mid-2009.

“The government’s cooling measures were perhaps too successful,” Joseph Lau, a Hong Kong-based economist at Credit Suisse Group AG, wrote in a Dec. 17 note. “Domestic demand is reportedly waning.” (Bloomberg)