HCMC – Singapore’s United Overseas Bank (UOB) has adjusted its growth projection for Vietnam in 2023, lowering it to 5.2%.
This revision comes in light of the challenges ahead and the country’s first-half expansion of a mere 3.72% against the previous year.
UOB said in its analysis that the State Bank of Vietnam (SBV) has been more aggressive than expected, reducing its refinancing rate by a cumulative 150 basis points year-to-date to 4.5%.
UOB expects a further 100 basis-point rate reduction in the third quarter, bringing it down to 3.5% before the central bank pauses to evaluate the effects of the rate cuts.
According to Vietnam’s General Statistics Office (GSO), the country’s six-month performance is significantly lower than the 6.46% growth rate recorded in the first half of last year.
In the second quarter of 2023, Vietnam’s consumer price index fell to 2.4%, lower than the Government’s target of 4.5%. Core inflation, excluding food, energy, and other public services, also decreased to 4.48% during this period from 5.01% in January-March.
Although this may provide an opportunity for the central bank to ease monetary policy in the first half, UOB predicts that achieving the previous 6% growth forecast will be challenging. Therefore, it has revised Vietnam’s GDP growth forecast for 2023 to 5.2%.
In the second quarter, Vietnam saw a year-on-year decline of 14.2% in exports, while imports contracted by 22.3%.
Exports declined by over 12% in the first half of this year.
Key export items, such as smartphones, saw a decrease of 27.1% in output during the second quarter, with garment and footwear output also edging down by 2.9% and 4.1% respectively, according to the GSO.
In the domestic market, revenue from retail goods and services increased by 10.9% in the first half of this year compared to the same period in 2022. However, this growth rate has been gradually sliding in recent months.
Looking ahead, UOB anticipates a challenging outlook, particularly in the fourth quarter of this year. The third quarter will be crucial, encompassing traditional production and an increase in exports ahead of year-end demand in developed markets.
Without significant improvements in the manufacturing and export sectors, it may be difficult for the economy to reach 7% growth in the third quarter and 5.2% for the whole year, according to the Singapore bank’s analysis.
