UOB upgrades 2022 growth forecast for Vietnam to 8.2%

Given Vietnam’s strong economic recovery in the third quarter, the Singapore-based United Overseas Bank (UOB) has raised its forecast for the country’s GDP growth this year to 8.2%, from the previous prediction of 7%.

The bank said the GDP expansion of 13.7% in Q3 is a record quarterly growth rate in Vietnam and surpassed the rate of 13.5% of India to become the highest in Asia this year.

The strong GDP rebound in Q3 was thanks to a record contraction of 6% in the same period last year, when the country had to impose social distancing to curb COVID-19 transmission. Meanwhile, the border reopening and easing of travel restrictions since the beginning of 2022 has helped fuel business activities since Q2, especially in the service sector.

Over the past three quarters, the country's GDP increased 8.8% year on year, compared to the growth of 6.4% in the first half.

In particular, the construction sector expanded 8.6% year on year during the nine months, manufacturing 10.7%, and services 10.6%. Recovery was particularly visible in the service sector, in which accommodation and food services rose 41.7% and entertainment services 14.5% thanks to relaxed restrictions and the return of foreign visitors, according to the UOB.

The strong GDP recovery in Q3 has created a prerequisite for vigorous growth in the entire 2022. Given the year-on-year expansion of 8.8% in the nine months, the UOB decided to upgrade its growth forecast for Vietnam this year to 8.2%, it said in a report.

However, it also expressed concern about the growth outlook for 2023, when the monetary policy strictly tightened by central banks is set to put pressure on the US and Europe - two main export markets that account for 41% of Vietnam's total exports.

The bank maintained the forecast for Vietnam next year at 6.6% based on an estimation that demand in the main markets will continue to slow down.