Vietnam 2023 economy to grow 7.2%: Standard Chartered

Standard Chartered Bank put its Vietnam GDP growth prediction at 7.2% for 2023 and 6.7% for 2024, following 8.02% in 2022.

Standard Chartered's 2023 forecast is higher than those of HSBC and Singapore’s United Overseas Bank, which are 5.8% and 6.62%, respectively.

"We still have conviction on Vietnam’s high growth potential over the medium term," Tim Leelahaphan, economist for Thailand and Vietnam at the bank, said in the report "Vietnam - Still enjoying high-growth status" released Friday.

"While macro indicators moderated somewhat in the fourth quarter of 2022, they remain largely robust. Retail sales posted solid growth in the second half of 2022, implying improved domestic activity," he added.

Vietnam’s trade balance has tentatively improved; exports may face global headwinds; and imports are at risk of reversal. FDI disbursements have continued to increase, but the outlook hinges on the global economy. Inflation may pose a threat to Vietnam’s continued recovery, Standard Chartered commented in the report.

"Inflation in the country is anticipated to rise throughout 2023, potentially reaching 6% in the final months of the year and averaging 5.5% in both 2023 and 2024, from 3.2% in 2022," Standard Chartered said . "Vietnam’s fiscal deficit may persist and be a source of inflation."

The bank expected the State Bank of Vietnam (SBV) to hike its interest rates by another one percentage point in this year’s first quarter and to stay on hold through the end of 2024.

Leelahaphan said, "We expect the central bank to stay vigilant against inflation, a weakening Vietnamese dong, and financial instability arising from risky loans in the real estate sector.

“The SBV may prefer a relatively strong Vietnamese dong, as long as it does not harm the country’s trade competitiveness.”

According to Leelahaphan, the Vietnamese currency has recovered sharply in recent weeks. However, the pace of its appreciation is likely to slow down, as several headwinds persist. The replenishment of Vietnam’s forex reserves is likely to be a key priority for its central bank. An improving current account backdrop and tourism recovery are likely to be supportive of the Vietnamese dong.

The USD/VND forex rate is forecast by Standard Chartered at 23,400 by the end of 2023 and 23,000 by the end of 2024.

In a report released Thursday, HSBC said it expects the SBV to slow its monetary tightening pace as the U.S. Federal Reserve is expected to slow and forex volatility has eased, though the Fed’s hiking cycle would be still underway.

The bank predicted the SBV to raise its refinancing rate by 0.5 percentage points each in the first and second quarters of this year, taking the refinancing rate to 7.0% by mid-2023.

With last year’s 8.02% expansion, the highest in 12 years, Vietnam was one of Asia’s fastest-growing economies.

However, the high growth rate in 2022 is partly derived from the low growth base in the two pandemic years 2020-2021, at 2.91% and 2.58% respectively.