Standard Chartered: Vietnam's recovery momentum will be stronger in Q2

Production at a textile enterprise

In its macroeconomic report on Vietnam titled “Vietnam – Recovery momentum to strengthen in Q2,” Standard Chartered Bank maintained its forecast for Vietnam’s economic growth (GDP) at 6.7% in 2022 as economic indicators have recovered broadly.

The report also said that the economic recovery could be stronger in late Q2 as domestic demand and the tourism sector recover.

However, according to Standard Chartered experts, Vietnam may face short-term risks, especially related to the recovery of the tourism sector and risks from the epidemic situation.

“The government has lifted quarantine requirements for international arrivals to Vietnam since mid-March. We believe the reopening of the tourism sector, which accounts for 10% of GDP, will be a factor to be closely monitored and assessed in the second quarter of this year after two years of shutdown due to the pandemic,” said Tim Leelahaphan, economist for Thailand and Vietnam at Standard Chartered Bank.

According to experts from Standard Chartered Bank, Vietnam continues to be a manufacturing hub and an important link in the global supply chain despite challenges related to geopolitical tensions and the pandemic. FDI inflows into Vietnam have started to increase this year after declining in 2021. Standard Chartered expects this trend to continue, especially in areas such as electricity production and supply, petroleum and air conditioning equipment.

“Foreign investors will continue to be the main driving force for Vietnam’s contribution to the global supply chain. Many large technology companies in the world have moved or planned to move their production from China to Vietnam in recent years to diversify their supply chains. Vietnam continues to be a regional manufacturing hub in areas such as electronics, textiles and footwear,” Mr. Tim Leelahaphan added.

Standard Chartered Bank maintains its forecast for Vietnam's inflation at 4.2% for 2022 and 5.5% for 2023. Supply-side factors pose risks to inflation, especially given current geopolitical tensions.

Standard Chartered also remains positive on the Vietnamese dong. Vietnam is likely to continue to record a current account surplus this year as tourism recovers, despite rising commodity prices. The bank forecasts the USD/VND exchange rate to reach VND22,300 by the end of 2022 and VND22,000 by the end of 2023.

Previously, experts from the Asian Development Bank (ADB) also forecast that Vietnam's economy could recover at 6.5% this year and grow more strongly at 6.7% in 2023 due to high vaccination rates, increased trade, and continued implementation of expansionary fiscal and monetary policies.

“High vaccination coverage has allowed the government to ease strict pandemic containment measures,” said Andrew Jeffries, ADB country director for Vietnam. “The timely shift in pandemic containment strategy has helped restore economic activity and ease bottlenecks in the business environment.”

ADB experts analyzed that recovery can be achieved thanks to the Government's economic recovery and development program (ERDP) in 2022 and 2023, including fiscal solutions such as tax exemption and reduction policies, health care support, infrastructure development and social security, and interest rate support for businesses and business households.

HSBC experts forecast Vietnam's economic growth in 2022 at 6.2%. The World Bank forecasts Vietnam's economic growth at 5.3%./.

International banks forecast Vietnam's economic growth in 2022. Unit %.

According to Vietnam+