HCMC – Standard Chartered has predicted Vietnam’s inflation at 4.2% this year, exceeding the target of below 4% set by the National Assembly, and said it could be even higher in the following years.
According to a report on Vietnam’s macroeconomy, the bank attributed the high inflation to supply-related reasons, especially amid the Russia-Ukraine conflict, said local news reports.
The bank forecast Vietnam’s inflation might climb to 5.5% next year but that its recovery would accelerate markedly in 2022, with GDP expanding 6.7% in the whole year when economic indicators recover on a large scale.
The economic recovery is likely to be stronger at the end of the second quarter when the domestic demand and the tourism sector recover.
However, the country may face short-term risks, especially those related to tourism recovery and the Covid-19 pandemic.
Tim Leelahaphan, economist for Thailand and Vietnam at Standard Chartered, said the reopening of the tourism sector, which contributes 10% of Vietnam’s GDP, needs to be observed and evaluated seriously in the second quarter of this year after two years of pandemic-induced closure.
Regarding foreign investment in Vietnam, Leelahaphan said Vietnam was still a production center and an important link in global supply chains despite some challenges. FDI inflows into Vietnam have begun to pick up this year after a slowdown in 2021.
Standard Chartered expected the trend would continue, especially in the electricity, fuel and air conditioning product manufacturing and supply sectors.
Foreign investors will remain the key driving force for Vietnam to contribute to global supply chains. Many large technology firms worldwide have shifted or planned to shift their operations from China to Vietnam over the past few years.
Vietnam remains a regional manufacturing hub in the electronics, textile-garment and footwear sectors, Leelahaphan added.