UOB raises Vietnam GDP forecast to 8.2%

Singapore’s United Overseas Bank (UOB) has revised up its 2022 growth forecast for Vietnam to 8.2% from the previous 7%, following the country’s nine-month economic expansion of 8.8% from a year earlier.

Vietnam’s 13.7% GDP growth in the third quarter has provided a strong foundation for the first nine months of the year, laying the ground for a strong performance in 2022, UOB Vietnam said Wednesday.

However, the multinational bank warned that the outlook for 2023 is more concerning, as aggressive policy tightening from major central banks is expected to weigh on the U.S. and Europe, the two major markets making up about 41% of Vietnam’s total exports.

“In our latest Quarterly Global Outlook, we expect a recession for the major economies in 2023 although it is uncertain at this point the extent and duration of the downturn. We are keeping our 2023 GDP growth projection for Vietnam at 6.6%, with the anticipation of slowing demand from these key markets,” the bank said.

The State Bank of Vietnam on September 22 increased its operating interest rates by one percentage point, or 100 basic points, effective the next day, following the U.S. Federal Reserve’s rate hikes.

As for this SBV move, UOB said it saw room for Vietnam’s central bank to increase the refinancing rate by another 100 basis points over the next two quarters.

On the forex front, the Vietnamese dong has not been spared from the Asia-wide weakness triggered by the Fed’s rate hikes and rising concerns of a China slowdown, the bank noted, adding that the Vietnamese dong is still likely to be weaker in the coming quarters, although losses may be cushioned by strong domestic growth outlook.

UOB put its U.S dollar/Vietnamese dong forecasts at 24,000 in this year’s fourth quarter; then 24,100, 24,200, and 24,300 in the first, second, and third quarters of next year, respectively.

In a report released late this September, Vietnam’s General Statistics Office predicted an 8% growth rate for the country this year.

Vietnam’s economic expansion can hit 7.2% this year and 6.7% next year, the highest in Southeast Asia, the World Bank said on September 27. The WB’s East Asia & Pacific economic update revised up Vietnam’s GDP forecast from 5.8% in early June. It projected the country's CPI at below 4% this year, which is the State Bank’s target.

On September 21, the Asian Development Bank put Vietnam’s growth prediction at 6.5% this year and 6.7% next year on strong economic fundamentals, key to fast recovery. The 2022 figure is the highest in Southeast Asia and equals the Philippines'.

Vietnam’s economic growth of 8.83% year-on-year in the first nine months is the highest recorded in 12 years. The figure for the same period in 2021 and 2020 - both pandemic years, was 1.42% and 2.12%, respectively. The economy expanded 2.58% last year.