Standard Chartered Bank forecasts Vietnam’s recovery will accelerate markedly in 2022, with GDP growing by 6.7%. The Bank raises its 2023 growth forecast for Vietnam to 7.0% as it believes Vietnam’s positive medium-term outlook remains intact.
The forecast is highlighted in the Bank’s recently published global research report titled “Still battling headwinds” and Vietnam-focused macro-economic research report titled “Vietnam – Moving back to high growth”.
“The economy should continue to bounce back in 2022 as the global pandemic situation improves. Income growth has outpaced spending growth in recent years; this provides a decent savings buffer against the pandemic.” said Tim Leelahaphan, Economist for Thailand and Vietnam, Standard Chartered, “COVID remains a key risk, at least in the short term. Quarter 1 could see full resumption of factory operations, after closures in Quarter 3 2021 closures, and government stimulus; clearer recovery is expected in March.”
According to Standard Chartered’s economists, exports should be supported in 2022 by a continued improvement in the global trade environment, although import growth is likely to remain high.
Inflation may become more of a concern for Vietnam in 2022. Supply-side factors (higher commodity prices, exacerbated by the pandemic) are likely to be the key driver near-term; demand pressures will come into play as the economy develops further. A prolonged virus outbreak could lead to supply-driven inflation risks. 2022 and 2023 inflation forecasts for Vietnam are 4.2% and 5.5% respectively.
The State Bank of Vietnam (SBV) is expected to keep its policy rate on hold at 4.0% in 2022 to support credit growth and manage inflation risks and normalise the policy in 2023, with a 50bps hike to 4.5% in Quarter 4 2023.
Standard Chartered Bank maintains its medium-term constructive view on the Vietnamese dong
(VND) amid expectations of a strong balance of payments (BoP). The rapid pace of appreciation
since July reflects more flexible exchange rate management by the central bank. The VND is among the best-performing EM currencies in 2021. However, the Bank expects the pace of appreciation to slow given that (1) Vietnam’s Current Account is now in deficit, and (2) USD-VND is approaching the limits of the exchange rate band. Nevertheless, Vietnam’s BoP surplus and the central bank’s FX policy flexibility should continue to support the VND over the medium term. The Bank forecasts USD-VND at 22,500 by mid-2022 and at 22,300 by end-2022
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