Vietnam central bank likely to raise interest rates in Q2 next year: StanChart

The Vietnamese central bank is forecast to lift interest rates by 50 basis points in Q2/2025 due to a pickup in inflation, a Standard Chartered economist has said.

Inflation has slowed recently but likely rose to an estimated 3% in October and is expected to continue increasing on an annual basis, with a further rise anticipated in mid-2025.

“This ongoing upward trend in inflation, coupled with a likely weaker VND (Vietnamese dong), underpins Standard Chartered’s expectation for the State Bank of Vietnam to raise interest rates by 50 bps in Q2/2025,” said Tim Leelahaphan, economist for Thailand and Vietnam, Standard Chartered Bank.

He said while the bank remains cautious about Vietnam’s economy in the near term, given the recent moderation in macro data, they also acknowledge the economy’s ability to perform better than market expectations.

In its recent macroeconomic updates, the bank anticipated that Vietnam’s macroeconomic data for October would show a moderation in growth compared to September, although key economic areas remain relatively robust. This easing trend may support keeping interest rates low.

“The government’s push for stronger economic growth may support low interest rates in the near future,” said the bank.

The bank recently forecast the Vietnam’s 2024 GDP growth to 6.8% from 6%, with momentum slowing from Q3. The bank also expects Q4 growth to moderate to 6.9%.

Vietnam has posted several months of surpluses this year and the external sector has stayed relatively solid. The monthly trade surplus may have widened to $3.8 billion in October, compared to $2.3 billion in September, adding to a series of surpluses this year, according to Standard Chartered.

The government-run General Statistics Office is due to announce data for October on Wednesday.

VinaCapital, among the biggest foreign-run asset managers in Vietnam, has forecast the country’s economy to grow 6.5% in both 2024 and 2025, with the composition of the expansion to change to more domestically driven factors next year.

The 6.5% growth next year would be achieved if the government were to boost both real estate market and infrastructure spending, which VinaCapital believes would make local consumers more confident to spend their money.