Standard Chartered Bank forecasts Viet Nam’s economic growth at 7.2 per cent in 2023 and 6.7 per cent in 2024, following a solid recovery to 8.0 per cent in 2022.
The forecast is highlighted in the bank’s recently published global research report on Viet Nam titled “Viet Nam – Still enjoying high-growth status”.
“We still have a conviction on Viet Nam’s high growth potential over the medium term,” said Tim Leelahaphan, Economist for Thailand and Viet Nam, Standard Chartered. “While macro indicators moderated somewhat in Quarter 4 2022, they remain largely robust. Retail sales posted solid growth in the second half of 2022, implying improved domestic activity.”
According to Standard Chartered’s economists, trade balance has tentatively improved; exports may face global headwinds; imports are at risk of reversal. FDI disbursements have continued to increase, but the outlook hinges on the global economy. Inflation may pose a threat to Viet Nam’s continued recovery.
Inflation is anticipated to rise throughout 2023, potentially reaching 6 per cent in the final months of the year and averaging 5.5 per cent in both 2023 and 2024 (from 3.2 per cent in 2022). Viet Nam’s fiscal deficit may persist and be a source of inflation.
Standard Chartered Bank expects the State Bank of Vietnam (SBV) to hike rates by another one per cent in Quarter 1 2023 and to stay on hold through end-2024 as it shifts to a tightening stance with a view to maintaining stability.
“We expect the central bank to stay vigilant against inflation, a weakening Vietnamese dong, and financial instability arising from risky loans in the real-estate sector. The SBV may prefer a relatively strong Vietnamese dong, as long as it does not harm the country’s trade competitiveness,” said Tim Leelahaphan, Economist for Thailand and Viet Nam, Standard Chartered.
According to Tim, the Vietnamese dong has recovered sharply in recent weeks, however, the pace of Vietnamese dong appreciation is likely to slow down, as several headwinds persist. The replenishment of FX reserves is likely to be a key priority for the central bank. An improving Current Account backdrop and tourism recovery is likely to be supportive to the Vietnamese dong. USD-VND is forecast at 23,400 by end-2023 and 23,000 by end-2024. — VNS