HCMC – A recent update on Vietnam’s macroeconomic situation by Standard Chartered Bank suggests that the country’s economic growth in the second half of 2023 is expected to reach 7% year-on-year, indicating signs of recovery.
“The medium-term outlook remains promising given Vietnam’s economic openness and stability. A continued recovery in tourist arrivals should shore up the services balance,” said Tim Leelahaphan, economist for Thailand and Vietnam at Standard Chartered Bank.
The inflation forecast for 2023 has been revised down to 2.8%, lower than the previous prediction of 4.3%. However, trade activity continues to be sluggish, posing challenges for manufacturing operations. Although Vietnam’s trade surplus increased in Q2, exports declined over 2022.
The report also predicts that the State Bank of Vietnam (SBV), the country’s central bank, will further cut the benchmark refinancing rate by 50 basis points to 4.0% in the third quarter. This level is expected to remain unchanged until the end of 2025.
The SBV has adopted a pro-recovery stance since the beginning of 2023, prioritizing growth amid easing price pressures, Leelahaphan said, adding that concerns about inflation and financial stability may limit additional rate cuts beyond the 50-basis-point reduction.
Despite slight improvements in macroeconomic indicators, the report has revised down the 2023 gross domestic product growth forecast to 5.4% from the previous projection of 6.5%. This adjustment is based on lower-than-expected data and a less optimistic global outlook.
Analysts said that Vietnam needs to foster robust GDP growth and enhance its infrastructure systems, especially in logistics, to attract foreign investment inflows. Achieving sustained international capital inflows will require an improved global market and additional efforts from the Government.