UOB cuts Vietnam 2023 growth forecast down to 5.2%

Singapore’s United Overseas Bank (UOB) has revised down its 2023 growth projection for Vietnam to 5.2% in view of the challenges ahead and the first half’s 3.72% expansion year-on-year.

The country's six-month performance is well below the 6.46% pace recorded in the first half of last year, Vietnam's General Statistics Office (GSO) reported.

“The State Bank of Vietnam (SBV) had been more aggressive than we expected by cutting its refinancing rate an accumulative 150 basis points year-to-date to 4.5%,” UOB said in an analysis Tuesday.

“We are factoring in a further 100 basis-point rate reduction this third quarter to 3.5% before the SBV pauses to assess the effects.”

The country’s exports in the second quarter fell 14.2% year-on-year, while imports shrank 22.3%. This is an extension from the first quarter, which saw exports contracting 11.9% and imports declining. In the first half of this year, exports declined by more than 12% as there has not been a month of gains in exports since the end of 2022.

Vietnam’s GSO reported on June 29 that among the country’s main exports earners, output of smartphones reduced 27.1% year-on-year in the second half to 39.8 million units, while garment output fell 2.9% and footwear output edged down 4.1% in the quarter.

In terms of prediction, UOB said: “Outlook ahead will be challenging, particularly in the fourth quarter of this year.

“This third quarter will be the key as these are the months of traditional production and exports ramp up ahead of the year-end festive demand in developed markets.”

The Singapore bank projected Vietnam’s economy would expand by 7.7% in the third quarter, placing its full-year forecast at 5.2%.

In its latest country review for Vietnam completed at end-Jun, the International Monetary Fund (IMF) pegged Vietnam’s 2023 growth projection at 4.7% before picking up again.

This March, UOB put its 2023 growth forecast for Vietnam at 6.6%.

The World Bank in early June cut its Vietnam GDP growth forecast this year to 6% in its June edition of “Global Economic Prospects,” but the figure remains among the highest in Asia, on par with the Philippines.