Vietnam's economy continues to gain traction: HSBC

Illustrative image (Photo: VNA)

Hanoi (VNA) - HSBC experts have predicted that Vietnam's economy will continue to gain traction, despite a less rosy external picture.

According to the bank, Vietnam saw a year-on-year increase of 17% in exports in the first six months of 2022, but it will be hard for overseas shipments to meet expectations in the last half of the year.

In its "Vietnam at a glance" report released on August 17, the bank said that after impressive export growth in the first half of 2022, a slower-than-expected pace was recorded at the start of the second half.

The main cause is a growth slowdown in the electronics industry, especially mobile phones. Samsung's second-quarter results show that demand for consumer electronics is weakening, affecting the smartphone, TV, and other segments.

While textile, garment and footwear exports rose sharply, by 30% from a year earlier, the Vietnam Textile and Apparel Association forecast the amount ordered will decline in the time ahead.

In July, import growth also slowed to only 3.4% compared to the double-figure growth in the previous months, partly due to lower energy prices. This reduced import orders for steel, coal, and crude oil commodities.

The HSBC report showed that the domestic economy has continued to reap certain successes despite an unpredictable global economic situation.

Retail sales posted a record growth rate of over 55% last month compared to last year. In particular, the revenue of tourism-related sectors was considerable, witnessing a double-digit expansion for four straight months.

Also, in July, Vietnam attracted more than 350,000 foreign tourist arrivals, tripling the monthly average in H1, bringing the total number of visitors to the country to 1 million, much lower than the set target of 5 million foreign holidaymakers for the whole year.

Vietnam's export growth slows down lowdown due to a decrease in the electronics industry. (Photo: VNA) 

Of the total figure, visitors from the Republic of Korea (RoK) accounted for 25%, while those from Europe made up 13% and the US, 10%.

Meanwhile, Standard Chartered has forecast Vietnam's GDP growth at 10.8% in the third quarter and 3.9% in the last quarter of 2022, contributing to an annual expansion of 6.7%.

Strong economic recovery will be seen in the latter half of the year, especially when the tourism sector has reopened after a two-year shutdown, according to Tim Leelahaphan, Standard Chartered's economist for Thailand and Vietnam.

Economists at the bank also projected that the State Bank of Vietnam would keep the interest rate at 4% this year to assist businesses and the recovery process despite growing inflation. As a result, retail sales will continue improving strongly, with 30.2% in July, compared to 27.3% in June.

Imports, exports and industrial production are predicted to increase by 22.2%, 20% and 15% in July, respectively, compared to 20%, 16.3% and 11.5% in June. Meanwhile, Vietnam is likely to record a trade deficit this month.

Inflation will accelerate to 3.6% in July from 3.4% in June - the fastest pace in two years, mostly due to supply pressure while demand is also gradually increasing, Leelahaphan noted, adding that inflation is still under control at present.

Recently, HSBC raised Vietnam's growth outlook this year to 6.9% from the previous prediction of 6.6% but also downgraded the forecast for 2023 to 6.3% from 6.7%.

The Singapore-based United Overseas Bank (UOB) also revised the country's 2022 GDP growth forecast to 7.0% from 6.5%, assuming no further severe domestic disruptions from COVID-19 and growth of around 7.6% - 7.8% in the second half of the year.

Meanwhile, the Asian Development Bank (ADB) maintained its growth forecast in mid-April at 6.5% for 2022 and 6.7% for 2023.

In the first half of 2022, Vietnam's GDP grew 6.4% from last year, thanks to the expansion of 9.7% in the manufacturing sector and 6.6% in the service sector./.