Standard Chartered Bank has raised its Vietnam GDP growth forecast for 2022 to 7.5% from the previous 6.7%. (Photo: dautuchungkhoan.vn) While the bank lowers its inflation forecast forthis year to 3.3% from 4.2%, it expects an acceleration in Q4 to 5.0% from 3.3%in Q3. Inflation has been largely under control; price pressures may increasein the rest of 2022 and in 2023. In addition to supply-side factors,demand-side factors might kick in more strongly.
“We maintain our average 2023 inflation forecastat 5.5%, expecting it to rise throughout next year, reaching around 6% latenext year. We see inflation as a threat to Vietnam’s continued recovery,” saidTim Leelahaphan, Economist for Thailand and Vietnam, Standard Chartered Bank.
Standard Chartered’s economists expect the StateBank of Vietnam (SBV) to continue tightening monetary policy and forecast a50bps hike in the refinancing rate each in Q4-2022 and Q1-2023, taking the rateto 6%, following a 100bps hike to 5% on September 22.
“We see a risk of SBV raising rates more than weexpect if inflation accelerates and the Vietnamese dong weakening morethan we forecast as the Fed maintains a relatively hawkish stance. We expectSBV to stay vigilant against inflation and financial instability besideshelping businesses recover from the COVID-19 impact,” said Leelahaphan.
According to the UK-based lender, the VND islikely to face several headwinds in the short term – a hawkish Fed, strong USD,higher commodity prices and slowing external demand. The VND continues tosignificantly outperform its peers across EM Asia, despite recent depreciation.
Standard Chartered Bank expects the pace of VNDdepreciation to slow in the coming months. USD-VND’s correlation with USD-CNYremains extremely strong. As such, a peak in USD-CNY will likely coincide withthe peak in USD-VND. The bank forecasts USD-VND at 24,200 by end-2022 andat 24,000 for end-Q1-2023 and declining towards 23,400 by end-2023./.
VNA
