Standard Chartered Bank has revised down its GDP growth forecasts for Vietnam to 4.7% from 6.5% for 2021 and 7.0% from 7.3% for 2022 due to softening economic indicators, the worsening pandemic and a still-slow vaccination rollout. The Bank anticipates a further downgrade and an interest rate cut by the State Bank of Vietnam (SBV) if COVID cases are not brought under control by September. It sees a rebound in Quarter 4 and expects trade data to remain supported by improving global trade. Softer economic growth is expected in Q3. According to the Bank, the COVID situation will likely continue to dampen inward investment for the rest of 2021 and may create further tourism uncertainty. “Vietnam’s economy is being hit by the pandemic like many others in Asia and other parts of the world; however, we remain bullish on its economic prospects over the medium and long term.” said Tim Leelahaphan, Economist for Thailand and Vietnam, Standard Chartered. Vietnam’s GDP is expected to expand by about 4.8 percent in 2021, although it has posted a robust economic performance in the first half of this year. This forecast, two percentage points lower than the projection made by the World Bank Group in December 2020, accounts for the negative impacts of the ongoing COVID-19 wave on economic activity. The forecast was made in the latest edition of Taking Stock – the World Bank’s biannual update on Vietnam’s economic performance released recently – highlighting the economic pains associated with the most recent COVID-19 outbreak. The mobility measures adopted by the government to contain the pandemic have hit the economy domestically. In July, retail sales fell by 19.8 percent year-over-year (y/y), the largest drop since April 2020, while the Purchasing Managers’ Index also declined significantly. On the external front, the merchandise trade balance turned into deficit over the past few months while foreign investors have demonstrated some caution. It appears that disruptions in industrial zones and supply chains caused by the broad-based COVID-19 resurgence have forced exporters to close factories temporarily or delay production.
“Whether Vietnam’s economy will rebound in the second half of 2021 will depend on the control of the current COVID-19 outbreak, the effective vaccine rollout, and the efficiency of the fiscal measures to support affected business and households, and to stimulate the recovery,” said Rahul Kitchlu, World Bank Acting Country Director for Vietnam. “While downside risks have heightened, economic fundamentals remain solid in Vietnam, and the economy could converge toward the pre-pandemic GDP growth rate of 6.5 to 7 percent from 2022 onward.”