Standard Chartered: Vietnam's GDP growth in 2023 to reach 5%

In its latest economic update on Vietnam, Standard Chartered Bank has downgraded Vietnam’s 2023 GDP growth forecast to 5.0%, from 5.4% previously. This reflects weaker-than-expected economic data so far this year and a bleaker global economic outlook.

This forecast revision requires growth in the fourth quarter of this year to reach 7.0%, which could remain a challenge.

Standard Chartered also maintained its full-year 2024 GDP growth forecast at 6.7% (6.2% in the first half and 6.9% in the second half).

Despite the temporary improvement in macroeconomic indicators, trade has yet to show clear signs of a manufacturing recovery. However, domestic recovery signs continue and are likely to strengthen further, supported by strong retail sales. Construction and accommodation have maintained strong growth year-to-date, while manufacturing has begun to expand. External factors are improving, with the current account surplus rising to 3.5% of GDP in 2024 from 2.0% in 2023.

The 2023 inflation forecast has been revised up to 3.4% (from 2.8% previously). The fourth quarter inflation rate is forecast at 4.3% (from 2.7% previously) and is likely to increase further next year. Inflation could lead to profit-seeking and increased risks of financial instability.Education , housing, food, and transportation costs have been the main drivers of recent inflation.

“The medium-term economic outlook remains promising, given Vietnam’s openness and economic stability. To attract FDI, Vietnam needs to restore rapid GDP growth and develop infrastructure,” said Tim Leelahaphan, economist for Thailand and Vietnam at Standard Chartered.

Standard Chartered also forecasts that the State Bank of Vietnam will not cut interest rates further and expects a 50 basis point increase in the fourth quarter of 2024 and maintained in 2025, to limit price pressures.

According to Standard Chartered, investment flows have accelerated rapidly in recent quarters. The bank has revised its forecast for the USD-VND exchange rate to reach VND24,500 by the end of 2023 (from VND23,400 previously) and to stay at VND23,500 (from VND23,000 previously) by the end of 2024. The weakening of the Chinese yuan has pushed the USD-VND exchange rate higher, albeit with a delay.

“The property market may need further liquidity support as the measures so far have only helped ease short-term debt repayment pressures. Low interest rates, newly approved projects and improved buyer sentiment could support the market,” Mr. Tim Leelahaphan added.

Previously, HSBC Bank experts also eliminated the previous prediction of a final 0.5% cut in the operating interest rate due to pressure from exchange rates and inflation.

While inflation was contained to 3.7% in September, below the ceiling of 4.5%, the continued incline in inflation has raised concerns, according to HSBC. On the one hand, food prices have increased by about 3% month-on-month for two consecutive months, pushing year-on-year inflation above 10%.

"We have revised our quarterly inflation forecasts and slightly raised our average inflation forecast to 3.4% (previously 3.2%) for 2023. Therefore, we no longer expect the SBV to cut interest rates this year. In our view, the conditions that previously warranted a further 50 basis point rate cut are no longer in place, with the recovery underway while inflation and foreign exchange pressures are rising," the HSBC expert emphasized.

HSBC expects the State Bank to keep its policy rate steady at 4.5% until the end of 2024, barring external shocks.

According to Vietnam+

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