HSBC lowers Vietnam’s growth to 5 percent

(VOV) - The Hong Kong-Shanghai Banking Corp (HSBC) has adjusted Vietnam’s 2012 GDP growth to 5 percent, down from its earlier forecast of 5.1 percent in May.

The ongoing declining market demands in the US and the Europe have prompted the Southeast Asian economy to slowdown in 2012, even in 2013, according to HSBC’s latest Asian Economics Quarterly report.

HSBC predicts that Vietnam’s GDP growth will stand at 5.3 percent in 2013, or 0.5 percent lower than its previous forecast and inflation is likely to reach two-digit rate by the year’s end. It says that inflation will hit 12.6 percent in the third quarter before declining to 11 percent in the fourth quarter of 2013.

HSBC regards October’s consumer price index (CPI) reading as an important determining factor in identifying the inflation trend over the remaining months of this year.

The report points out that Vietnam’s CPI is rising despite credit growth falling, hinting at a possible increase in the last quarter of 2012. The State Bank of Vietnam (SBV) has decided to issue treasury bills lasting different terms – one month, two months, and three months – in order to improve the liquidity in the banking sector.

The central bank will not adjust interest during the remainder of this year, instead focusing on settling the bad debts plaguing the banking system.

In regards to the foreign exchange market, HSBC says that many big Vietnamese gold traders purchased large volumes of US dollars after the SBV banned the import of material gold. The US dollar to Vietnamese dong exchange rate will hover around VND12,500/USD at the end of 2012 and carry through to next year.

HSBC also highlights significant improvements in Vietnam’s macroeconomy, and acknowledges the country’s efforts in stabilising market prices, increasing foreign currency reserves, and controlling inflation.