HSBC has revised down Vietnam’s GDP forecast by 0.3% to 6.2% due to impacts of the global fuel shortage.
Surging global fuel prices have led to an increase in Vietnam's fuel expenses, negatively impacting the country’s trade balance. In March, crude oil imports more than doubled, while gasoline imports quadrupled year-on-year, the bank reported.
Vietnam may have a current account deficit for the second year in a row, albeit at a modest level of only 0.2% of GDP. The government last year posted a current account deficit of 1.1% of GDP, for the first time in four years, it said.
Given the external issues, HSBC slightly increased its forecast for the U.S. dollar/Vietnamese dong exchange rate in the short term, though the forecast by the end of the year remains at VND22,800.
The creditor pointed out that suppressed personal consumption recovery induced by rising living costs, as well as a weak labor market, have slowed retail sales growth, with only a 2.5% increase in Q1 year-on-year.
Vietnam's trade surplus in Q1 narrowed to a minimum of $800 million albeit a strong recovery in exports. Imports grew 16% and half of them were electronic components.
Despite a slight downgrade of Vietnam's GDP, HSBC believed the country remains one of the region's economies with outstanding growth this year, in line with the government’s plan of 6-6.5%.
Fitch Ratings in a release on Monday stated that it expects Vietnam’s GDP growth to accelerate to 6.1% in 2022 and 6.3% in 2023 from 2.6% in 2021, led by a recovery in domestic demand, strong exports and high FDI inflows, particularly in the manufacturing sector.
ADB in March anticipated Vietnam’s growth rate to converge to its pre-pandemic level of 6.5-7% in 2022 thanks to “fast vaccination progress, sustained global economic recovery, and certain key drivers of economic growth that include the economy’s digital transformation.” In the same month, IMF estimated the country’s economic expansion at 6.6%.
According to HSBC, Vietnam had a solid start in 2022, with GDP expanding 5.03% year-on-year in Q1, owing to a large-scale rebound.
Vietnam's General Statistics Office (GSO) data shows that the industrial sector in Q1 grew 8.36% from Q1/2021, accounting for 51.08% of the overall growth, while services climbed by 4.58% and made up 43.16%. Agriculture rose 2.45%, contributing 5.76%.
Vietnam fully reopened its market to international travelers on March 15, paving the way for tourism industry resurgence.
HSBC maintains its recently revised upwardly of 3.7% inflation forecast, which is still below the State Bank of Vietnam’s 4% target.
"Fortunately, given that food costs and price pressures induced by rising demand have been managed, Vietnam's inflation remains under control compared to other emerging economies," the report said.
However, the bank believed that the possibility of rising inflation will signal a tightened monetary policy. This explained why it raised its projection for Q3 by 50 basis points, rather than Q4 as previously forecast. Consequently, the regulatory interest rate is expected to grow to 4.5% by the end of 2022.