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

Vietnam’s economic recovery is likely to be stronger at the end of the second quarter of 2022 when the domestic demand and the tourism sector recover, according to Standard Chartered Bank.

In its latest Vietnam-focused macro-economic research report, Standard Chartered forecasts Vietnam's recovery will accelerate markedly in 2022, with GDP growing by 6.7 percent in the whole year when economic indicators are being recovered on a large scale.

Experts from Standard Chartered said Vietnam remains a key manufacturing centre and link in the global supply chain despite challenges related to geopolitical tensions and the COVID-19 pandemic.

However, they also noted that the Southeast Asian nation may face short-term risks, especially those related to the tourism recovery and the COVID-19 pandemic.

According to Tim Leelahaphan, Economist for Thailand and Vietnam at Standard Chartered, the re-opening of the tourism sector, which accounts for 10 percent of Vietnam’s GDP, will be a factor that needs to be observed and evaluated seriously in the second quarter of this year after two years of closure due to the pandemic.

FDI inflows into Vietnam have begun to pick up this year after a slowdown in 2021.

The bank expects this trend to continue, especially in the areas of electricity generation and supply, petroleum and air conditioning equipment.

Foreign investors will continue to be the main driving force for Vietnam to contribute to the global supply chain, said Leelahaphan.

Many big technology enterprises in the world have moved or planned to move their production from China to Vietnam in recent years in order to diversify their supply chains, he said, adding that Vietnam continues to be a regional manufacturing hub in terms of electronics, textiles and footwear.

Standard Chartered maintains its inflation forecast for Vietnam at 4.2 percent for 2022 and 5.5 percent for 2023. The bank said that supply factors will bring risks of increasing inflation, especially the current geopolitical tension.

It also maintains its medium-term constructive view on the Vietnamese dong (VND) amid expectations of a strong balance of payments (BoP).

Vietnam is likely to continue to run a current account surplus this year as the tourism sector recovers, despite higher commodity prices, it said.

The bank forecasts the USD-VND exchange rate at 22,300 by end-2022, and 22,000 by the end off 2023.

Previously, experts from the Asian Development Bank (ADB) forecast that Vietnam's economy can expand by 6.5 percent this year and grow stronger at 6.7 percent in 2023.

Meanwhile, Vietnam’s economic growth was respectively projected at 6.2 percent and 5.3 percent in 2022 by the Hong Kong & Shanghai Banking Corporation (HSBC) and the World Bank.