Standard Chartered revises down Vietnam’s GDP growth forecast to 6.5%

Standard Chartered Bank has lowered Vietnam’s 2023 GDP growth forecast to 6.5% from the previous 7.2% and got more cautious on the external front.

The country’s April macro indicators show moderation, the global bank said in its latest macro-economic updates about Vietnam, a global production base.

The bank explained that Vietnam’s exports declined 17.1% year-on-year in March, imports fell 20.5%, and industrial production barely rose. In the first 4 months of the year, the country’s exports fell 11.8% from a year earlier, imports were down 15.4%, with a trade surplus of $6.4bn. Inflation was 2.8% in April, easing for the third month in a row and down from 4.9% in January; core inflation rose 4.6% as retail sales saw a robust growth of 11.5%.

Between January and April, disbursed FDI in Vietnam totaled $5.9 billion, down 1.2% year-on-year, and pledged FDI was $8.9 billion, down 17.9%.

“The significant import contraction points to slowing economic activity given Vietnam’s import-intensive nature, despite still-strong domestic consumption,” said Tim Leelahaphan, Standard Chartered economist for Thailand and Vietnam.

Standard Chartered forecasts the State Bank of Vietnam (SBV) will make another 50-basis point cut in the refinancing rate to 5% by the end of the second quarter, followed by rates on hold until the end of 2025.

However, Standard Chartered sees upside risk to the rate forecast, especially towards this year-end, as the SBV may focus more on financial stability than growth.

“The SBV has shifted to a pro-recovery stance since the start of 2023. In addition to cutting rates, it is aiding businesses facing difficulties by giving them more time to address liquidity shortages,” said Leelahaphan.

“In April, the central bank allowed easier loan terms, including delaying loan repayments, by up to 12 months, and providing rate waivers. The property market may need further liquidity support, as measures so far appear to have only reduced short-term repayment pressure,” he said.

HSBC said last week it expected Vietnam’s economy to expand 5.2% this year. The forecast is lower than the International Monetary Fund's rate in mid-April. The IMF said Vietnam’s economic expansion might slow down to 5.8% this year and then rebound to 6.9% in 2024, among the highest figures in Asia.

Meanwhile, the World Bank’s April update revised downward its forecast for Vietnam to 6.3% this year, down from 6.7%