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Standard Chartered forecasts Vietnam’s 2021 GDP growth at 7.8%

Standard Chartered forecasts Vietnam’s 2021 GDP growth at 7.8%

A worker at a factory in Vietnam – PHOTO: HUNG LE

HCMC - Standard Chartered has forecast that Vietnam’s gross domestic product (GDP) growth would rebound to 7.8% in 2021 from 2.9% in 2020, with manufacturing likely to continue driving the economy, helping Vietnam outperform the rest of Asia.

This forecast was highlighted at Standard Chartered’s Global Research Briefing held virtually late last week, drawing senior representatives from over 100 local and foreign corporate clients. The annual event discussed Standard Chartered’s recently published Global Focus-Economic Outlook 2021 report entitled “The road to redemption” and its latest Global Research report on Vietnam entitled “Vietnam-2021: Strong recovery expected”.

“The economy emerged from the worst of the Covid-19 downturn in the third quarter of 2020, and we think the recovery will remain intact. Vietnam has been one of the best-performing economies globally for the past decade and we expect this to continue,” said Tim Leelahaphan, economist for Thailand and Vietnam at Standard Chartered.

Standard Chartered’s economists anticipated that improving the growth in investment and services should support the economy in the coming years. Effective Covid-19 containment measures have further enhanced Vietnam’s appeal to overseas investors, making it an attractive destination globally for foreign direct investment.

The country stands to benefit from the trade and technology tensions between the United States and China, which are expected to continue under the new U.S. administration. Significant supply-chain relocation is already underway as a result of the U.S.-China trade war.

Lingering uncertainty for global demand and depressive investment sentiments are likely to weigh on foreign direct investment inflows, but inward investments should remain strong.

“Vietnam is a clear beneficiary, and we expect this trend to continue in the next couple of years as tensions persist. Vietnam will continue to serve as an alternative destination as countries and companies seek to reduce their reliance on manufacturing in China. This is positive for the country’s medium- to long-term growth prospects,” added Leelahaphan

The macro-economic report also suggested that increased competition may force Vietnam to improve its product and supply chains as the country looks to become a high-tech manufacturer, which may require increased productivity, education and technology transfer, among other factors.

The Regional Comprehensive Economic Partnership could provide opportunities for local small and medium enterprises to move up the value chain with the simplification of procedures. Manufacturers in advanced countries such as Japan, China and South Korea may consider minimizing costs by outsourcing the final processing steps to less expensive ASEAN countries such as Vietnam to achieve cost benefits.

The webcast was part of the 2021 Standard Chartered Global Research Briefing series, which aims to provide in-depth insights and analyses on global, regional and local socio-economic trends that will have an impact on international business and trade in the year ahead.

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