Vietnam’s GDP growth is forecast to accelerate to 6.7% in 2024, 6.2% in the first half and 6.9% in the second half, Standard Chartered Bank says in its newly-released global research report.
“Vietnam continues to offer a promising medium-term outlook,” said Tim Leelahaphan, economist for Thailand and Vietnam at Standard Chartered, suggesting the country upgrade infrastructure and prepare to lower carbon emissions to maintain rapid growth and competitiveness.
According to the economist, retail sales and industrial production have stayed robust despite the recent moderation. Exports and imports are starting to recover, though electronics-related trade remains tentative.
The FDI recovery remains lackluster; a stronger recovery in FDI flow would require faster GDP growth, he added, noting headwinds to global trade pose a key risk.
Given re-emerging inflation concerns, inflation is anticipated to pick up to 5.5% in 2024 from 3.3% in 2023.
Standard Chartered forecasts monetary loosening has likely ended, given the Vietnam’s economic recovery starting to gain momentum. The bank expects rates to stay on hold despite a possibility of another rate cut. Refinancing rate is expected to stay on hold at 4.5% until the end of the third quarter this year, before a 50 basis-point hike in Q4.
“We expect the central bank to strike a delicate policy balance between supporting the economy recovery and combating rising inflation and currency weakness. Inflation and a wide income-spending gap may result in a search-for-yield behavior and financial instability risks,” says Leelahaphan.
The economist expects the Vietnamese dong (VND) continues to face headwinds, with a mild VND appreciation, targeting 24,000 by end-2024. Forex reserves is forecasted to be rebuilt when USD strength abates.
The Vietnamese parliament has set a growth target of 6-6.5% this year, with inflation controlled at 4-4.5%, after the economy expanded 5.05% last year.