Standard Chartered forecasts Vietnam’s economy to rebound in H2 (Photo: VietnamPlus) Hanoi (VNA) – Vietnam’s economy will recover in the second half of 2023, with its growth forecast to pick up to 7% year-on-year from the 3.7% in the first half, Standard Chartered Bank said in its recent macro-economic updates about the country.
“The medium-term outlook remains promising given Vietnam’s economic openness and stability. A continued recovery in tourist arrivals should shore up the services balance,” said Tim Leelahaphan, the bank’s economist for Thailand and Vietnam.
Despite macroeconomic indicators have improved slightly, these are still relatively weak. The trade contraction remains deep, resulting in muted manufacturing and economic activity. Trade surplus rose in the second quarter, but exports contracted year-on-year.
In overall, Vietnam’s trade surplus in the first half of 2023 exceeded 2022 levels as softer imports (amid lower energy prices) more than offset sluggish export growth. Standard Chartered Bank lowered the country’s 2023 GDP growth forecast to 5.4% from the previous prediction of 6.5%. The bank also turned more cautious on the weaker-than-expected data year to date and a gloomier global outlook.
Inflation forecast for 2023 is revised down to 2.8% from 4.3% previously. A sustained resumption of investment inflows may require both an improved global backdrop and government effort. To reinvigorate FDI inflows, Vietnam needs to resume rapid GDP growth and develop its infrastructure. Solid infrastructure, particularly in logistics, could incentivise more manufacturers to relocate to Vietnam.
Standard Chartered Vietnam branch (Photo: VietnamPlus) The international lender forecasts the State Bank of Vietnam (SBV) will make another cut the benchmark refinancing rate by another 50bps to 4% in Q3 (the same level as during the pandemic years) and stay on hold until the end of 2025. In addition to cutting rates, the SBV allowed easier loan terms, including delaying loan repayments (by up to 12 months) and providing rate waivers. However, it remains uncertain how developers can arrange payment on interest and principal due on their bonds, as well as fund working capital and projects. The property market may need further liquidity support, as measures so far appear to have only reduced short-term repayment pressure.
“The SBV has shifted to a pro-recovery stance since the start of 2023 and with a focus more on growth amid easing price pressure. Lingering concerns about inflation and financial instability may prevent additional rate cuts beyond the 50bps,” said Tim Leelahaphan.
According to Standard Chartered economists, risks to the VND FX outlook are evenly balanced. The bank forecasts USD-VND at 23,400 from the end of 2023 through Q3 of 2024. Precautionary reserve rebuilding should cap VND upside in the near term; repricing higher of US Fed terminal rates and a weaker CNY also weigh on the VND.
Standard Chartered Bank forecasts USD-VND exchange rate at 23,400 from the end of 2023 through Q3 of 2024 (Photo: VietnamPlus) Recently, HSBC also forecast that Vietnam’s economy is expected to rebound in the last quarter this year and might finish the year with a 5% GDP growth rate.
"We now expect a meaningful economic rebound from the last quarter, warranting further monetary support," it said, expecting the SBV to make another 50 basis-point rate cut in the third quarter.
Division Chief of the International Monetary Fund (IMF)’s Fiscal Affairs Department Paulo Medas said that Vietnam’s economic growth is projected to recover in the second half of 2023, reaching around 4.7% for the year, supported by a rebound in exports and expansionary domestic policies. Inflation is expected to remain contained below the SBV’s 4.5% ceiling.
According to the expert, Vietnam can return to high growth rates over the medium term, as structural reforms are implemented./.
