Standard Chartered forecasts Vietnam's GDP to reach 6.7% in 2022

Vietnam's economy continues to recover strongly

In its latest economic report on Vietnam, Standard Chartered Bank forecasts that Vietnam's economy will continue to recover in August as the economic recovery process has shown widespread signals.

The bank maintained its forecast that Vietnam's GDP growth will reach 10.8% in the third quarter of 2022 and 3.9% in the fourth quarter of 2022, bringing the full-year GDP growth to 6.7%.

“The recovery is expected to be strong in the second half of the year, especially as Vietnam has reopened its tourism sector after a two-year shutdown. However, rising global oil prices could also have negative impacts on the economy,” said Tim Leelahaphan, economist for Thailand and Vietnam at Standard Chartered Bank.

According to Standard Chartered Bank, retail sales growth is expected to increase by 60.2% year-on-year in August compared to 42.6% in July. Industrial production, export and import growth are expected to increase by 15.2%, 15% and 15.2% respectively compared to 8.9%, 3.4% and 11.2% in July. Vietnam is likely to record a trade deficit of US$1.4 billion in August. Electronics continue to be the largest export item.

According to experts at Standard Chartered, inflation in August reached 3% year-on-year compared to 3.2% in July. Inflation remains under control. Price pressures will increase in the second half of 2022 and 2023. In addition to supply factors, demand pressures are also strengthening.

Standard Chartered Bank expects the State Bank of Vietnam to remain vigilant against risks of financial instability. According to Governor Nguyen Thi Hong, the State Bank of Vietnam is expected to maintain the credit growth limit of 14% this year, despite some opinions that the credit room needs to be loosened to reduce capital congestion in the real estate market.

Banks may face greater liquidity risks as credit to the real estate sector accounts for a large proportion, with up to 94% of outstanding real estate credit having a loan term of 10 to 25 years, while 80% of banks' mobilized capital is short-term.

According to the State Bank, credit growth from the beginning of the year to date has reached 9.4% compared to the end of 2021 and in the first half of the year increased by 16.7% compared to the same period. Outstanding real estate loans account for 1/5 of total credit in the whole system.

Along with Standard Chartered, HSBC experts also assessed that despite the gloomy external picture, the domestic economy continues to achieve certain successes. Textiles and footwear are assessed to have strong growth, reaching 30% compared to the same period in 2020, partly due to favorable base effects. As Ho Chi Minh City and neighboring areas had to undergo a strict social distancing period in Q3.2021, the base effect is likely to last through Q3.2022.

In addition, according to HSBC, retail sales growth reached a record high of more than 55% compared to the same period last year. Although partly due to a favorable base effect, consumption momentum continued to increase strongly for both goods and services. In particular, sales in tourism-related industries were noteworthy, witnessing double-digit growth for four consecutive months.

Vietnam attracted more than 350,000 international tourists, three times the monthly average in the first half of 2022, bringing the total number of visitors to Vietnam to date to 1 million.

Of these, tourists from South Korea (25%), Europe (13%) and the US (10%) accounted for nearly half of the total number of visitors. This was followed by tourists from ASEAN countries with increasing interest. The Vietnam National Administration of Tourism is striving to achieve the target of 5 million tourists this year.

Vietnam is currently issuing 6,000 visas a day to Indian tourists, up from 250 before the pandemic. However, the labor supply is still lacking, so it cannot meet the demand, especially in some famous tourist destinations.

According to Vietnam+