Standard Chartered (OTC:) Bank has lowered Vietnam’s GDP growth forecast for 2023 from 5.4% to a challenging 5%, according to the bank’s economist Tim Leelahaphan. This revision is attributed to disappointing year-to-date data and a less optimistic global outlook. Despite this, the bank maintains a positive forecast for Vietnam’s economy in 2024, predicting a GDP growth of 6.7%.
The bank emphasizes the significance of swift GDP growth and infrastructure development for reigniting foreign direct investment inflows. While macroeconomic indicators are showing signs of recovery, bolstered by strong retail sales, rising inflation could potentially lead to financial instability. The inflation forecast for 2023 has been adjusted upwards from 2.8% to 3.4%, with Q4 inflation expected at 4.3%.
Despite these challenges, Standard Chartered predicts an increase in the current account surplus from 2% in 2023 to 3.5% in 2024. The State Bank of Vietnam is expected to raise rates by 50 basis points in Q4 2024 to counteract inflationary pressures, with rates predicted to remain stable in 2025.
The Prime Minister of Vietnam, Pham Minh Chinh, has set a GDP growth target just over 5% for 2023, lower than the National Assembly’s approved target of 6.5%. He also aims to cap inflation at 4% for the same year.
In addition to Standard Chartered’s revisions, United Overseas Bank (OTC:) (UOB) has also reduced Vietnam’s full-year growth forecast to 5% from the previous estimate of 5.2%. Meanwhile, Michael Kokalari of VinaCapital anticipates less than 5% GDP growth in 2023 due to lower demand for Vietnamese products, attributing this to an over-accumulation of inventories by US retailers during COVID supply-chain disruptions and the absence of a post-COVID spending boom. Despite this, Kokalari remains optimistic about a manufacturing-driven recovery in 2024.
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