HÀ NỘI — Standard Chartered Bank forecasts Việt Nam’s recovery will accelerate markedly in 2022, with GDP growing by 6.7 per cent. The bank raised its 2023 growth forecast for Việt Nam to 7 per cent as it believes Việt Nam’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 Việt Nam-focused macro-economic research report titled “Việt Nam – 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 Việt Nam, Standard Chartered.
“COVID-19 remains a key risk, at least in the short term. Quarter 1 could see full resumption of factory operations, after closures in the third quarter of 2021, and 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 Việt Nam 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 Việt Nam are 4.2 and 5.5 per cent, respectively.
The State Bank of Việt Nam (SBV) is expected to keep its policy rate on hold at 4 per cent in 2022 to support credit growth and manage inflation risks and normalise the policy in 2023, with a 50 basic points hike to 4.5 per cent in the last quarter of 2023.
Standard Chartered Bank maintains its medium-term constructive view on the Vietnamese đồng 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 VNĐ is among the best-performing emerging market currencies in 2021.
However, the bank expects the pace of appreciation to slow given that Việt Nam’s current account is now in deficit, and USD-VNĐ is approaching the limits of the exchange rate band. Nevertheless, Việt Nam’s BoP surplus and the central bank’s foreign exchange policy flexibility should continue to support the VNĐ over the medium term. The bank forecasts USD-VNĐ at 22,500 by mid-2022 and at 22,300 by end-2022. — VNS