A likely improvement in external demand in the fourth quarter should support manufacturing growth, forecast at roughly 7.3 percent in full-year 2020. (Photo: VNA) Hanoi (VNA) - Standard Chartered expects Vietnam’s economy to grow by 3 percentin 2020 and surge to 7.8 percent in 2021. Rising consumption on improvingsentiment, and faster manufacturing will drive growth in the last quarter ofthis year.
The forecast is highlighted in Standard Chartered’s recently published GlobalResearch report entitled “Vietnam – Q3 disruption, but recovery remains intact”.
“Vietnam is one of the few Asian economies to have registered positive growthso far this year, despite the second wave of infections. We expect the fourthquarter growth to increase as domestic activity resumes and sentiment picks up.Improving services growth and infrastructure investment should help Vietnamoutperform the rest of Asia. We maintain our positive view on Vietnam’s medium-and long-term economic outlook,” said Chidu Narayanan, economist for Asia,Standard Chartered Bank.
According to the latest macroeconomic report on Vietnam, a likely improvementin external demand in the fourth quarter should support manufacturing growth,forecast at roughly 7.3 percent in full-year 2020. Both exports and imports areexpected to increase as a result. Trade is likely to remain in surplus for therest of 2020 as exports and imports move in tandem.
Construction activity is anticipated to improve in the fourth quarter,supported by increased public infrastructure investment. Private consumption,accounting for nearly 68 percent of GDP, should grow strongly in the fourthquarter on improving domestic sentiment. Private investment, however, is likelyto remain subdued on lingering uncertainty about medium-term demand.
Standard Chartered’s economists project newly registered FDI inflows into Vietnamto decline in 2020, but remain strong at close to 13 billion USD. Lingeringuncertainty on global demand and depressed investment sentiment are likely toweigh on FDI inflows in the medium term.
While the country stands to benefit from the ongoing relocation ofmanufacturing amid elevated geopolitical tensions, inflows are likely to belower than in previous years. Further government measures and a sustained moveof low-tech manufacturing should support FDI inflows.
Thestudy also forecasts that the State Bank of Vietnam (SBV) will remainaccommodative in the near term to support growth. The central bank cut thepolicy rate by a further 50bps to a historical low of 4 percent on October 1,in line with Standard Chartered’s forecast from May 2020. The central bank’s200bps of rate cuts in the year to date and the reopening of the economy shouldaid further credit growth in the near term./.
VNA
