HCMC – Standard Chartered forecasts that Vietnam’s will accelerate markedly in 2022, with gross domestic product growing by an estimated 6.7%.
Vietnam’s positive medium-term outlook remains intact and the economy should continue to bounce back in 2022 as the global pandemic situation improves, the bank said in its Vietnam-focused macro-economic report titled “Vietnam – Moving back to high growth”.
“Income growth has outpaced spending growth in recent years. This provides a decent savings buffer against the Covid pandemic,” said Tim Leelahaphan, Standard Chartered economist for Thailand and Vietnam.
“Covid remains a key risk, at least in the short term. The first quarter of 2022 could see a full resumption of factory operations, after closures in the third quarter of 2021, and clearer recovery is expected in March.”
According to Standard Chartered’s economists, exports should be supported in 2022 by a continued improvement in the global trade environment, although import growth is likely to remain high.
Inflation may become more of a concern for Vietnam in 2022. Supply-side factors such as higher commodity prices exacerbated by the Covid pandemic are likely to be the key drivers near-term.
Besides, demand pressures will come into play as the economy develops further. A prolonged Covid-19 outbreak could lead to supply-driven inflation risks. Inflation forecasts for Vietnam in 2022 and 2023 are 4.2% and 5.5%, respectively.
The State Bank of Vietnam is expected to keep its policy rate steady at 4% in 2022 to support credit growth and manage inflation risks and normalize the policy in 2023.
Meanwhile, HSBC expects Vietnam to return to solid growth of 6.5% in 2022, although the spread of Omicron poses risks locally and globally.
In the fourth quarter of 2021, Vietnam’s GDP grew strongly by 5.8% year-on-year, overshooting market expectations for moderate growth. This bought the country’s full-year GDP growth to 2.6% in 2021, a positive number in a challenging year but also the slowest pace in the past 30 years.
After all, it was a challenging year for Vietnam, particularly for its commercial hub of HCMC and the surrounding provinces, which suffered four months of hard lockdowns until October. However, the good news is that the trough seems to have passed.
Yun Liu, economist at HSBC, believed Vietnam would return to a firm broad-based growth track after concluding 2021 with a strong rebound from its worst contraction.
On the one hand, manufacturing and exports are expected to continue to lead, partly supported by resilient FDI commitments. On the other hand, domestic demand will likely further recover as lingering restrictions are gradually phased out and the labor market recovers.
“After two years of subdued growth, we expect Vietnam’s growth to accelerate by 6.5% in 2022. The authorities also set the 2022 growth target at 6.5-7%, a similar pace as in the pre-pandemic days”, he said.