Standard Chartered lowers Vietnamese growth forecast to 6.5%

VOV.VN - The UK-based bank, Standard Chartered, has lowered its annual growth forecast for the nation from 6.7% to 6.5%.

Despite this, the bank maintains its 7.3% growth forecast for 2022 and continues to predict a post-COVID-19 economic acceleration.

“We believe Vietnam is moving towards its goal of becoming a regional supply-chain hub, a modern industrial economy and a high-income country in the future,” said Tim Leelahaphan, economist for Thailand and Vietnam, Standard Chartered.

“Vietnam managed the COVID-19 situation well in 2020, further enhancing its appeal to foreign investors. The country had already benefited from the ongoing supply-chain shift in recent years. In the near term, the country’s pandemic management will be crucial to the outlook,” he added.

Standard Charter’s economists anticipate that domestically-focused sectors such as retail are likely to be the hardest-hit in the event that the current COVID-19 wave persists. The main focus moving forward is on whether the impact on the industrial sector will be temporary or more long-lasting.

While the global pandemic has hit the Vietnamese economy via reduced tourism, supply-chain disruptions, and weaker overseas demand, external indicators show the potential for a strong recovery. Indeed, exports during the first half of the year rose by 28.4% on-year, with imports rising by 36.1%.

According to the UK-based bank, rising inflation will reduce the likelihood of further interest rate cuts. Therefore, the bank does not expect rate hikes despite improving economic and credit growth from the last quarter of 2020. In addition, it also expects the State Bank of Vietnam (SBV) to keep its refinancing rate at 4.0% through to the end of 2023 as it supports credit growth, whilst the possibility of a rate hike may gradually emerge providing that inflation and growth accelerate faster than previously expected.

Standard Chartered has recently lowered its US$–VND forecasts to 22,900 at the end of the third quarter of the year, from its previous figure of 23,100, and to 22,850 at the end of 2021, from 23,000. Indeed, its end of 2022 forecast remains unchanged at 22,500, with the balance of payments remaining highly supportive of the currency through strong exports and high net FDI inflows.

This comes after the Asian Development Bank (ADB) lowered its forecast on July 20 for Vietnamese gross domestic product (GDP) growth this year to 5.8% from its previous prediction of 6.7% in April. This change is largely due to the fourth wave of COVID-19 infections impeding the country's ongoing recovery.