Illustrative image (Photo: VNA) Vietnam is among the world's fastest-growing economies with anaverage GDP growth rate of about 6.5% per year in the period before theCOVID-19 pandemic. The target of economic growth in 2021-2025 at 6.5-7% peryear was set out at the 13th National Party Congress despite the fact that theeconomy was severely affected by the COVID-19 pandemic in 2021. However,VinaCapital forecasts that this growth can still be maintained in the 2023-2025period.
High economic growth will support companies listed on the stockmarket. In 2023, the business results of listed companies may be affected bythe slowing growth of exports and consumption and high interest rates. The earningsper share (EPS) growth is forecast to be in single digits in 2023.
However, from 2024, when inflationary pressures are gone, centralbanks around the world can loosen monetary policy to stimulate the economy, andat the same time, the internal difficulties and challenges of the economy willbe tackled, Vietnam's economy will recover, and the stock market's EPS growthis likely to return to double digits.
Infrastructure investment will remain a priority focus of theGovernment for many years to come and will have a positive impact on theeconomy in the long term.
In July 2022, the Government issued Resolution No. 86/NQ-CP on thedevelopment of a safe, transparent, efficient and sustainable capital market inorder to stabilise the macro-economy, and mobilise resources for socio-economicdevelopment.
The Resolution stressed the need to urgently implement measures toupgrade Vietnam's stock market from the frontier market to the emerging marketto attract investment capital. Currently, the stock exchanges and securitiescompanies are testing the new trading system KRX, which can meet therequirements of launching new products, shorten the transaction time, and helpthe Vietnamese stock market meet the requirements of upgradation.
According to VinaCapital, the growth prospect of Vietnam's economyin the next 3-5 years and the prospect of upgradation will be an importantdriving force to attract cash flow from both domestic and foreign investors.The size of the stock market will continue to expand thanks to increasedliquidity and there are still many new companies likely to list in the comingyears.
Both the Vietnamese economy and stock market are still in a highgrowth phase for at least the next five years, VinaCapital said.
VinaCapital also cited factors that are forecast to positivelyaffect the market in 2023, including inflation, interest rates, exchange rates,public investment, and China's reopening.
Specifically, global inflation is likely to have passed its peak.The Bloomberg Global Commodity Index peaked in June 2022 and was down about 16%by the end of 2022. US inflation also peaked at 9.1% in June 2022, from whereit started decreasing.
Central banks will be less aggressive in tightening monetarypolicy. In 2022, the US Federal Reserve (Fed) raised interest ratesseven times. The Fed is expected to continue to raise interest rates in2023, but the increase will be much less than in 2022 as inflation pressure hassubsided.
Pressure on domestic interest rates and exchange rates has decreasedsignificantly. Specifically, the overnight interbank interest rate fell below5.0% by the end of 2022. Also in December 2022, credit institutions agreed toapply the maximum deposit interest rate of 9.5% for all tenors, while previously,there were some small banks that pushed deposit rates up to 11-12%.
In addition, public investment will be speeded up in 2023. TheNational Assembly has approved a public investment plan in 2023 with a totalcapital of over 700 trillion VND, an increase of about 25% compared to the planin 2022.
In addition, China ending the zero-COVID policy and reopening theeconomy will have a positive impact on the Vietnamese economy, especially thetourism sector. In the period before the COVID-19 pandemic, Chinese touristsaccounted for nearly one-third of international visitors to Vietnam. Inaddition, the reopening of China's economy will help reduce input costs forVietnamese manufacturing enterprises using materials imported from China, and willpromote exports from Vietnam to China, especially for agricultural products,VinaCapital forecasts./.
VNA
