StanChart forecasts Vietnam’s Q2 GDP to moderate amid higher inflation

Standard Chartered Bank has forecast Vietnam’s Q2 GDP growth to moderate to a still-strong 5.3% year-on-year, slowing from 5.7% in Q1, citing slower economic activity.

In the bank’s recent macro-economic updates about Vietnam, Standard Chartered economists expects retail sales growth to ease to 8.2% year-on-year in June from 9.5% in May, export growth to ease to 14.2% year-on-year in June from 15.8% in May, and electronics exports to continue their year-to-date improvement.

Imports and industrial production are likely to grow 26% year-on-year and 5.2% in June, respectively, slowing from 29.9% and 8.9% in May.

Inflation may rise to 4.5% year-on-year in June from 4.4% in May, marking a third straight month above 4%. Education, housing and construction materials, health care and food have driven inflation recently. This trend may continue in the coming months, the economists added.

“Despite the likely Q2 slowdown, we think Vietnam’s recovery remains intact. However, economic challenges could persist in Q3 amid rising price pressures, forex weakness and soft global demand,” said Tim Leelahaphan, economist for Thailand and Vietnam, Standard Chartered Bank.

The bank expects the State Bank of Vietnam (SBV) to hike the refinancing rate by 50 basis points in Q4 in response to rising inflation. Forex weakness supports Standard Chartered’s call for a hike in Q4, or possibly earlier.

Fed moves will be key to the SBV’s policy decisions, the bank noted.

Standard Chartered Bank in April lowered Vietnam's 2024 GDP growth forecast to 6% from 6.7% made in January due to lower-than-expected Q1 growth and global trade headwinds.

Analysts with leading Singaporean bank UOB last week expected Vietnam’s GDP growth to pick up to 6% year-on-year in Q2. They also kept their growth forecast for Vietnam unchanged at 6.0% for 2024, the lower band of the official target of 6.0-6.5%.

Researchers with the Hanoi-based Vietnam Institute for Economic and Policy Research (VEPR) this week anticipated Vietnam’s growth at 6% in Q2 and 5.8% in H1.