Vietnam’s economy likely to grow 6.8 percent in 2022: HSBC

Hanoi (VNA) – The Hong Kong Shanghai Banking Corporation (HSBC) has revised upward its forecast for Vietnam’s economic growth next year to 6.8 percent from the previous 6.5 percent.

According to Ngo Dang Khoa, country director of foreign exchange and capital markets at HSBC Vietnam, once the current resurgence of the pandemic is put under control, the Southeast Asian country will benefit from a strong recovery driven by technology development and foreign direct investment, becoming one of the countries with the most potential in the region.

Positive signals despite COVID-19

New waves of COVID-19 are sweeping countries in Southeast Asia, including Vietnam, Khoa said.

Despite the rapid increase in the number of COVID-19 infections since the fourth wave of outbreaks hit Vietnam at the end of April, Vietnam’s GDP still increased by 5.64 percent in the first half of 2021, higher than the 1.82 percent growth recorded in the same period last year, Khoa said.

Meanwhile, the industrial sector recorded a year-on-year rise of 8.91 percent and export turnover surged by an estimated 28.4 percent in the same period. Furthermore, groups of agricultural, forestry and fishery products are showing signs of recovery thanks to increased demand from Western countries.

In addition, the consumer price index (CPI) remained rather stable with a monthly increase of only 0.19 percent in June, and 2.41 percent year-on-year.

The inflation rate is likely to be curbed at 2.8 percent this year, much lower than the maximum target of 4 percent set by the National Assembly, Khoa stressed.

Khoa, however, pointed out challenges to Vietnam’s economic growth, saying that the current COVID-19 wave could put remarkable pressure on a GDP growth target of 6.5 percent this year.

Recent outbreaks have raised concerns that long-term disruption to production will affect the sustainability of Vietnam's economic recovery.

Regarding macroeconomic matters, the latest outbreak has caused disruptions to supply chains and would affect the sustained recovery of the Vietnamese economy in the long term, he said.

Social distancing measures put in place to curb the spread of the coronavirus have also affected the consumption outlook and the recovery of the services and tourism industries.

The new variants of COVID-19 and the slow progress of a vaccination rollout could delay the reopening of borders to foreign investors and tourists, he noted.

For a sustainable recovery to get back on track, Khoa said, it is important to quickly contain the spread of the COVID-19 pandemic and accelerate the nationwide vaccination programme.

With the closure of industrial parks and a long period of social distancing, Vietnam’s economic growth will definitely face many challenges in the third quarter and the second half of 2021 as a whole, he said.

Timely fiscal and monetary policies are needed to help businesses and citizens overcome difficulties caused by the pandemic, Khoa suggested.

Exchange and interest rates likely to fluctuate

In terms of the exchange rate, Khoa predicted the Vietnamese Dong - USD exchange rate to be 23,100 VND per USD by year-end.

It may be difficult to maintain a stable Vietnamese Dong – US dollar exchange rate in the second half due to Vietnam’s trade deficit, inflation worries and a possible rise in US interest rates.

Regarding interest rates, Vietnam has yet to see inflationary pressure. However, if prices continue to increase, the State Bank of Vietnam might have to raise interest rates.

He suggested that Vietnam should not increase interest rates too early or too quickly while the economy is being severely affected by the pandemic.

Enterprises need to be proactive in hedging operations, including exchange rate and interest rate risk, through products licensed by the State Bank, in order to better handle risk management, he said./.