The forecast is highlighted in the bank’s recently published global research report on Vietnam, titled “Vietnam – Still enjoying high-growth status”.
“We still have a conviction on Vietnam’s high growth potential over the medium term,” said Tim Leelahaphan, Economist for Thailand and Vietnam, Standard Chartered. “While macro indicators moderated somewhat in Quarter 4 2022, they remain largely robust. Retail sales posted solid growth in the second half of 2022, implying improved domestic activity.”
According to Standard Chartered’s economists, trade balance has tentatively improved; exports may face global headwinds; imports are at risk of reversal. FDI disbursements have continued to increase, but the outlook hinges on the global economy. Inflation may pose a threat to Vietnam’s continued recovery.
Inflation is anticipated to rise throughout 2023, potentially reaching 6% in the final months of the year and averaging 5.5% in both 2023 and 2024 (from 3.2% in 2022). Vietnam’s fiscal deficit may persist and be a source of inflation.
Standard Chartered Bank expects the State Bank of Vietnam (SBV) to hike rates by another one% in Quarter 1 2023 and to stay on hold through end-2024 as it shifts to a tightening stance with a view to maintaining stability.
“We expect the central bank to stay vigilant against inflation, a weakening Vietnamese dong, and financial instability arising from risky loans in the real-estate sector. The SBV may prefer a relatively strong Vietnamese dong, as long as it does not harm the country’s trade competitiveness,” said Tim Leelahaphan, Economist for Thailand and Vietnam, Standard Chartered.
According to Tim, the Vietnamese dong has recovered sharply in recent weeks, however, the pace of Vietnamese dong appreciation is likely to slow down, as several headwinds persist. The replenishment of FX reserves is likely to be a key priority for the central bank. An improving Current Account backdrop and tourism recovery is likely to be supportive to the Vietnamese dong. The USD/VND exchange rate is forecast at 23,400 by end-2023 and 23,000 by end-2024./.
