Vietnam's recovery gains momentum in Q2: Standard Chartered

A manufacturing line in a textile enterprise (Photo: VietnamPlus)

According to a report by Standard Chartered Bank, Vietnam remains an important manufacturing hub and link in the global supply chain despite challenges related to geopolitical tensions and the Covid-19 epidemic.

In its macroeconomic report on Vietnam titled “Vietnam – recovery will be stronger in the second quarter,” Standard Chartered Bank maintained its forecast for Vietnam's economic growth (GDP) at 6, 7% in 2022. The bank made the call after its assessment of economic indicators that are signaling a broad-based recovery.

The report also stated that the economic recovery process is likely to be stronger at the end of the second quarter when domestic demand and the tourism sector recover.

However, according to Standard Chartered experts, Vietnam may face short-term risks, especially related to the recovery of the tourism sector and risks from the pandemic.

Tim Leelahaphan, economist for Thailand and Vietnam at Standard Chartered said that the opening of the tourism sector, which contributes 10 percent of GDP of Vietnam, will be a factor that needs to be observed and evaluated closely in the second quarter of this year after 2 years of closure due to the pandemic.

Vietnam continues to be a manufacturing hub and an important link in the global supply chain despite challenges related to geopolitical tensions and the pandemic. FDI inflows into Vietnam have begun to pick up this year after a slowdown in 2021. Standard Chartered expects this trend to continue, especially in areas such as electricity generation and supply, petroleum and air conditioning equipment.

Foreign investors will continue to be the main driving force for Vietnam to contribute to the global supply chain, added Leelahaphan.

The economist said many large technology enterprises in the world have moved or planned to move production from China to Vietnam in recent years in order to diversify their supply chains. Vietnam continues to be a regional manufacturing hub in areas such as electronics, apparel and footwear, he maintained.

Standard Chartered Bank maintains its inflation forecast for Vietnam at 4.2 percent for 2022 and 5.5 percent for 2023. Supply factors will bring risks of increasing inflation, especially the current geopolitical tensions.

For the Vietnam dong, Standard Chartered also continued to give a positive assessment. The Bank said Vietnam is likely to continue to run a current account surplus this year as the tourism sector recovers, despite higher commodity prices. The bank predicts that the USD/VND exchange rate will reach 22,300 VND by the end of 2022 and 22,000 VND by the end of 2023.

Previously, experts from the Asian Development Bank (ADB) also forecast that Vietnam's economy could recover at 6.5 percent this year and grow stronger at 6.7 percent this year due to high vaccination rates, trade promotion and continued implementation of expansionary fiscal and monetary policies.

Andrew Jeffries, ADB Country Director for Vietnam, said that high vaccination rates have allowed the Vietnamese Government to lift strict pandemic containment measures. The timely shift in pandemic containment strategy has helped restore economic activities and ease bottlenecks in the business environment, the ADB official emphasised.

The ADB expert said the recovery can be achieved by the Government's economic recovery and development program (ERDP) in 2022 and 2023. This includes fiscal solutions such as tax exemption and reduction policies, support for health care, infrastructure development and social security and interest rate support for businesses and business households.

HSBC experts forecast Vietnam's economic growth in 2022 at 6.2 percent, among the highest in the region. It also believes inflation will be 3.7 percent, which while high will still be basically under control. Meanwhile, the World Bank forecasts that Vietnam's economic growth will reach 5.3 percent./.