HCMC – Standard Chartered Bank has revised down its GDP growth forecast for Vietnam in 2023 to 5% from the earlier estimate of 5.4%.
This adjustment is based on year-to-date data that has fallen short of expectations and a less optimistic global outlook.
In its latest update, the bank suggests that for Vietnam to achieve this revised projection, it would need to record year-on-year growth of 7% in the fourth quarter, which is a challenging target under the current circumstances.
However, the bank remains optimistic about 2024, maintaining a GDP growth forecast of 6.7%, with a 6.2% rise in the first half of the year and a 6.9% increase in the second half. Macroeconomic indicators are showing signs of improvement, though figures have not yet exhibited a definitive rebound in manufacturing. Nevertheless, the domestic economy is on the path to recovery, supported by strong retail sales.
On a positive note, the external financial outlook for Vietnam appears to be bright. The bank predicts the nation’s current account surplus would increase to 3.5% of GDP in 2024, up from 2% in 2023.
Additionally, the inflation forecast for 2023 has been adjusted up from 2.8% to 3.4%, with expectations for inflation in the fourth quarter to reach 4.3%. This rate is expected to rise further in the subsequent year, driven by rising costs in education, housing, food and transport.
The bank warns that increasing inflation could lead to a search-for-yield behavior, elevating the risk of financial instability.
“Despite the present challenges, Vietnam’s medium-term economic prospects look favorable due to its openness and stability,” said Tim Leelahaphan, economist for Thailand and Vietnam at Standard Chartered. To reignite foreign direct investment inflows, rapid GDP growth and infrastructure development are crucial, he said.
Regarding monetary policy, Standard Chartered anticipates that the State Bank of Vietnam will refrain from further rate cuts. Instead, a 50 basis-point increase is expected in the fourth quarter of 2024 to counteract anticipated inflationary pressures, with rates predicted to remain stable in 2025.
Capital outflows have accelerated recently, leading to revised dong-dollar exchange rate projections. The rate is anticipated to be VND24,500 per dollar by the end of 2023, up from the previous estimate of VND23,400 per dollar.
Prime Minister Pham Minh Chinh has announced the Government’s intentions to target a GDP growth rate slightly over 5%, lower than the National Assembly’s approved target of 6.5%, and cap inflation at 4% for 2023.
