Production of electronic parts in Vietnam. (Photo: VNA)HCMCity (VNA) – TheSingapore-based United Overseas Bank (UOB) has revised up Vietnam’s 2022 GDPgrowth forecast to 7.0% from 6.5%, assuming no further severe domesticdisruptions from COVID-19, and projected growth of around 7.6 – 7.8% in thesecond half of the year (H2).
Itsaid the projection was based on the strong set of data in the second quarterof 2022 (Q2) and a historical track record of a generally robust H2performance.
Accordingto the bank, data released by the General Statistics Office of Vietnam (GSO) onJune 29 showed Vietnam’s real GDP growth surprised in Q2, expanding 7.7%year-on-year from 5.0% in Q1, surpassing the UOB’s estimate of 6.0%year-on-year.
Thesharp rebound in Q2 GDP was driven by manufacturing activities whichaccelerated for the 4th straight quarter, and a recovery in services output asit continued to regain its footing since the last contraction in the thirdquarter of last year.
Forthe first half of 2022, Vietnam’s GDP rose 6.4% year-on-year on the back of a9.7% gain in the manufacturing sector and 6.6% in services output. Othermonthly data released suggest that activities have generally returned to normalafter restrictive COVID-19 measures were eased and borders reopened.
TheUOB said inflationary pressures on Vietnam are manageable as the main source ofimpact is energy related while food prices are stable. However, upside risksare significant given the rapid pace of gains in energy prices which willeventually spread to the rest of the economy, especially if higher pricespersist.
Withthe latest set of data, the bank anticipated an official forecast of 6.0 – 6.5%to be revised higher, although downside risks remain. These include the impactof the ongoing Russia-Ukraine conflict on geopolitical developments, energy andfood prices, and supply chain disruptions.
“Inaddition, the US Federal Reserve (Fed)’s aggressive policy bias could beanother source of financial market risk for emerging economies such as Vietnam,”it said.
Amidstthese uncertainties and despite a more robust domestic economy, there is roomfor the State Bank of Vietnam (SBV) to stay patient and keep its policy ratesteady for now to support the recovery efforts, especially with inflationwithin its target range.
Assuch, the UOB expected the current refinancing rate at 4.0% and rediscountingrate at 2.5% to remain at these record low levels until at least the end of 2022.
Thebank also expected Asia’s emerging currencies such as the VND to be weighed asthe Fed looks set to front load its rate hikes further in H2. As such, it forecaststhe USD/VND to be on a steeper upward trajectory in the months ahead. ItsUSD/VND forecasts are at 23,400 in the third quarter of 2022, 23,500 in thefourth quarter of this year, 23,550 in the first quarter of 2023, and 23,600 inthe second quarter of 2023./.
