People shop at a supermarket in Hanoi. (Photo: baochinhphu.vn)The forecast is highlighted in the Vietnam section of the bank’s recentlypublished global research report titled GlobalFocus – Economic Outlook Q3-2022: Near the tipping point.
“Vietnam’s economic recovery has shown signs of broadening; macroeconomic indicatorscontinued to recover in June. The recovery may accelerate markedly in secondquarter of the year, particularly as tourism reopens after a two-year closure.That said, rising global oil prices may have negative consequences for theeconomy,” said Tim Leelahaphan, Economist for Thailand and Vietnam, StandardChartered Bank.
According to Standard Chartered Bank’s economists, 2022 and 2023 inflation isforecast at 4.2% and 5.5% respectively. Inflation remains under control fornow. The fuel component of inflation has increased, while other components havebeen relatively low. Price pressures – particularly for food and fuel – mayincrease later in 2022 and in 2023. This could pose a risk to the nascentrecovery in domestic consumption. Elevated inflation could also result insearch-for-yield behaviour or increase financial instability risks.
Standard Chartered Bank expects the State Bank of Vietnam (SBV) to keep thepolicy rate on hold at 4% in 2022 and policy normalisation to take place in thefourth quarter of 2023, with a 50 basis point (bps) hike to 4.5%.
“The SBV is likely to stay vigilant against inflation and financialinstability, particularly amid ongoing geopolitical risks, although we expectit to stay accommodative this year to support businesses. It has not signalleda change in its stance yet, and Vietnam’s economic recovery has just started.However, we see a risk that the SBV may raise rates earlier than we expect,given rising inflation and a weaker-than-expected Vietnamese dong – especially if the Fed maintainsa relatively hawkish stance,” Tim said.
The UK-backed bank raises its USD-VND forecasts to account for pressure on thegoods trade balance from elevated commodity prices, with USD-VND projected at 23,000at end-Q3-2022 and 22,800 at end-Q4-2022. The bank expects sharp Vietnamese dongappreciation next year, along with a likely rebound in Vietnam’s currentaccount surplus.
The macro-economic study also points out three factors could adversely affect Vietnam’seconomic outlook, including new COVID-19 variants, the lifting of US tariffs onimports from China, and a global recession. Pandemic concerns persist, despite Vietnam’sshift to a ‘living with COVID-19’ policy. On the trade front, the White Househas said it is reviewing tariffs on some US imports from China to easeinflation. This could slow the pace of investment relocation from China to Vietnam,reducing FDI inflows to Vietnam or even resulting in outflows. Meanwhile, aglobal recession could hit exporters hard and exports of goods and services areequivalent to more than 100% of Vietnam’s GDP./.
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