The bank maintains its 7.3 percent growth forecast for 2022, and continues to expect a post-COVID-19 economic acceleration.
“We believe Vietnam is moving towards its goal of becoming a regional supply-chain hub, a modern industrial economy and a high-income country in the future,” said Tim Leelahaphan, Economist for Thailand and Vietnam, Standard Chartered.
“Vietnam managed the COVID-19 situation well in 2020, further enhancing its appeal to foreign investors. The country had already benefited from the ongoing supply-chain shift in recent years. In the near term, the country’s pandemic management will be crucial to the outlook,” he went on.
Standard Chartered’s economists anticipate domestically oriented sectors such as retail are likely to be the hardest-hit if the current COVID-19 wave persists. The focus now is on whether the impact on the industrial sector will be temporary or more long-lasting.
While the global pandemic has weighed on Vietnam’s economy via reduced tourism, supply-chain disruptions and weaker overseas demand, external indicators are showing a strong recovery. Exports in the first half of the year rose 28.4 percent year-on-year and imports rose 36.1 percent.
According to the UK-based bank, rising inflation is reducing the likelihood of further interest rate cuts. The bank does not expect rate hikes despite improving economic and credit growth from the last quarter of 2020. It also expects the State Bank of Vietnam (SBV) to keep its refinancing rate at 4.0 percent through to the end of 2023 to support credit growth. The possibility of a rate hike may gradually emerge if inflation and growth accelerate faster than expected.
Standard Chartered has recently lowered its US dollar – Vietnamese dong forecasts to 22,900 at the end of the third quarter of 2021 (from 23,100) and to 22,850 at the end of 2021 (23,000). Its end of 2022 forecast remains unchanged at 22,500. The balance of payments remains highly supportive of the currency, with strong exports and high net FDI inflows.
Earlier, on July 20, the Asian Development Bank (ADB) also lowered its forecast for Vietnam’s gross domestic product (GDP) growth in 2021 to 5.8 percent from its previous prediction of 6.7 percent in April, as the fourth wave of COVID-19 infections hampers the country's recovery.
Vietnam's economic growth accelerated from 1.8 percent in the first half of 2020 to 5.6 percent in the same period this year as the global recovery from the pandemic boosted exports, the bank said.
However, the ongoing wave of COVID-19 infections has led to disruptions in supply chains and prolonged social distancing measures in many provinces and cities whose growth rates are high. These have severely affected the circulation of goods and greatly limited economic activity in 2021.
Also as part of the report, the bank is projecting 7.2 percent economic growth for developing Asia in 2021, compared with its forecast of 7.3 percent in April, as new COVID-19 outbreaks slow the recovery in some regional economies.
Excluding the newly industrialised economies of Hong Kong (China); the Republic of Korea; Singapore; and Taiwan (China), developing Asia’s updated growth outlook is 7.5 percent for 2021 and 5.7 percent for 2022, compared with earlier projections of 7.7 percent and 5.6 percent, respectively./.
VNA/VNP
