Illustrative image (Photo: Vietnam+) Hanoi (VNA) - The Vietnamese economy will grow 6.6% in 2021, down 0.4% compared to the last year’s figure, according to the Hongkong and Shanghai Banking Corporation (HSBC).
On March 31, HSBC released a new economic report, in which the bank made some adjustments to economic growth and inflation forecasts of Asian economies in 2021 and 2022.
According to the HSBC, the Vietnamese economy will grow 6.6 percent in 2021, slightly decreasing from last year’s figure of 7.1 percent. However, the HSBC strongly raised its forecast for Vietnam's GDP growth in 2022, as saying it could grow to 8.5 percent in 2022, up 2 percent compared to the recent forecast.
Among 16 economies in Asia of HSBC growth forecasts, Vietnam is the country with the strongest adjusted GDP in 2022. HSBC emphasised that Vietnam's economy has proven its resilience during the COVID-19 pandemic. Vietnam's GDP in 2020 grew by 2.9 percent and be among the few economies with positive growth.
The success of Vietnam comes from quick and successful measures to combat the COVID-19 epidemic. Although Vietnam had to experience the third outbreak in February 2021, everything was quickly brought under control within just a month.
According to HSBC, Vietnam's GDP grew by 4.5 percent in the first quarter of 2021 thanks to good export growth. Vietnam's exports in the first quarter of 2021 grew by 20 percent over the same period thanks to a strong increase in exports of electronics and equipment. In addition, Vietnam also benefits from the high growth cycle of the global technology industry and strong FDI inflows.
At the same time, indicators of the manufacturing industry show that the industry is recovering gradually. This trend will develop positively along with the strong improvement of global demand.
HSBC lowered its forecast for Vietnam's GDP growth in 2021 to 6.6 percent because the economic recovery in the first quarter of 2021 was lower than expected. Despite this, Vietnam continues to benefit from the technological cycle, stable FDI inflows and numerous trade agreements signed and will remain one of the bright spots in Asia.
Meanwhile, Vietnam’s inflation rate in 2021 is set to average around 3% in 2021, mainly reflecting the impact of moderating food prices, which should more than offset recovering oil-related prices, according to HSBC.
“That said, inflation should remain below the State Bank of Vietnam (SBV)’s 4 percent inflation ceiling this year, allowing the SBV to maintain its accommodative monetary policy throughout 2021,” stated the bank’s latest report, adding it expected the central bank to keep its refinancing rate unchanged at 4 percent.
“As global economic prospects improve, there are concerns about inflation volatility,” it noted.
Although Tet distortion played a role, the main driver was a sharp increase in electricity prices. After a one-off electricity subsidy from Electricity Group Vietnam (EVN) in January, electricity prices jumped 20 percent month-on-month. Meanwhile, rising food prices and higher transport costs also helped to push up headline inflation.
“While electricity price volatility is perhaps a one-off administrative adjustment, food prices and transport costs are worth watching closely, as they both weigh heavily in the overall CPI basket, with weightings of 34 percent and 10 percent, respectively,” stated the HSBC.
Since the end of 2019, higher pork prices have pushed up food inflation, even to the extent that headline inflation temporarily breached the “4 percent inflation ceiling” for four consecutive months.
HSBC experts also worry that, although Vietnam's economy is recovering, there are still many risks. Firstly, if the progress of COVID-19 vaccination is prolonged, it will affect the tourism industry. It is estimated that Vietnam will have 150 million doses of COVID-19 vaccine to inject 70 percent of the population in 2021.
Besides, in the domestic market, when the labour market growth is weak, personal consumption will still be affected. Therefore, supporting vulnerable businesses and workers remains a key task in the coming time, the bank advised./.
