UOB forecasts that Vietnam will continue to cut regulatory interest rates in the third quarter of this year to stimulate its economy.(Photo: VNA) HCM City (VNA) – The United Overseas Bank (UOB) haslowered its 2023 economic growth forecast for Vietnam from 6% to 5.2%, andforecast that Vietnam will continue to cut regulatory interest rates in thethird quarter of this year to stimulate its economy.
In the latest economic growth in Q2/2023 report of Vietnam, thebank said that weak export activities with their possible impacts on domesticdemand, the US Federal Reserve (Fed)’s halting interest rate hikes in June, andpossible further rate cut in 2024, as well as confidence in the stable exchangerate despite previous interest rate cuts drive the prospect of Vietnam's nextrate cut this year.
As a result, UOB predicts a further 100 basis points reductionin interest rates in the third quarter of 2023 to 3.5% for the refinancing ratebefore the State Bank of Vietnam (SBV) pauses to assess the impacts.
Based on statistics from the General Statistics Office (GSO),the bank’s experts said Vietnam's real GDP growth rate in the second quarter of2023 increased to 4.14% over the same period of last year, from 3.28% in thefirst quarter of 2023. This result exceeded the general forecast of 3.8% butwas lower than the expected rate of 5.9%.
The main driver of the continued dismal growth results was adrop in manufacturing activity and external demand. Overall, in the first halfof 2023, Vietnam's economy grew by 3.72% year-on-year, much lower than the6.46% pace in the first half of 2022 as well as the official growth target of6.5%.
Regarding inflation, Vietnam's consumer price index droppedsharply to 2.4% in the second quarter of 2023 from 4.18% in the first quarterof 2023, lower than the Government's target of 4.5%. Core inflation excludingprices of food, energy, and other public services fell to 4.48% in the secondquarter from the 5.01% in the first quarter of 2023, creating an opportunity forthe SBV to loosen monetary policy further in the first halfof the year.
According to UOB, with the growth rate in the first six monthsof 2023 much lower than the official growth target for the year, it will bedifficult to keep up with the 6% forecast that the bank gave before. As aresult, UOB's Global Market and Economic Research has revised its GDP growthforecast for Vietnam in 2023 to 5.2%, from the previous forecast of 6%./.
