In its latest macro-economic report, “Viet Nam – Recovery to gain momentum in Quarter 2”, Standard Chartered Bank maintains its 2022 GDP growth forecast for Viet Nam at 6.7 per cent, as the recent bounce in economic indicators has become broader.

The recovery is likely to accelerate markedly in late Q2 as domestic demand and tourism recover. Short-term uncertainty prevails, particularly around tourism recovery and pandemic risks.

“The government lifted its quarantine requirement for international arrivals in mid-March. We think the reopening of tourism, which accounts for close to 10 per cent of GDP, is the key development to watch in Q2, after a two-year closure,” said Tim Leelahaphan, Economist for Thailand and Viet Nam, Standard Chartered.

According to Standard Chartered economists, Viet Nam remains a manufacturing hub and a key link in the global supply chain despite geopolitical and pandemic-related challenges.

Inward FDI has resumed growth this year after contracting in 2021. The bank expects this to continue, particularly in manufacturing and electricity, gas, and air conditioner supplies.

“Foreign investors remain the key driver of Viet Nam’s contribution to the global supply chain. Several major global tech companies have shifted (or made plans to shift) production to Viet Nam from China in recent years to diversify their supply chains. Viet Nam remains attractive as a regional manufacturing hub for electronics, textiles, garments and footwear sectors,” Leelahaphan added.

Standard Chartered Bank maintains its 2022 and 2023 inflation forecasts of 4.2 per cent and 5.5 per cent, respectively.

Supply-side factors pose upside risks to inflation, particularly given the ongoing geopolitical situation.

Over the medium term, demand-push inflationary factors are likely to kick in as the economy recovers.

A supportive external balance drives the bank’s constructive view of the Vietnamese dong.

Viet Nam’s current account is likely to remain in a surplus this year, despite higher commodity prices, amid a recovery in tourism.

The bank forecasts USD-VND exchange rate at 22,300 by end of 2022 and 22,000 by the end of 2023. — VNS