Vietnam economy forecast to grow 7% in H2, after 3.7% in H1

The Vietnamese economy is expected to expand by 7% year-on-year in the last six months of this year, much stronger than the first half’s 3.72%, Standard Chartered Bank forecast.

In its July macro-economic updates about Vietnam, the bank said sustained month-on-month improvement in trade data since the start of 2023 points to a clearer recovery in the second half.

“The medium-term outlook remains promising given Vietnam’s economic openness and stability. A continued recovery in tourist arrivals should shore up the services balance,” Tim Leelahaphan, Standard Chartered economist for Vietnam and Thailand, said in the updates.

Standard Chartered lowered the country’s 2023 GDP growth forecast to 5.4% from the previous 6.5%. The bank also turned more cautious on the weaker-than-expected data year-to-date and a gloomier global outlook.

The bank’s Vietnam inflation forecast for 2023 was revised down to 2.8% from 4.3% previously. A sustained resumption of investment inflows may require both an improved global backdrop and government effort. To reinvigorate foreign direct investment inflows, Vietnam needs to resume rapid GDP growth and develop its infrastructure.

“Solid infrastructure, particularly in logistics, could incentivize more manufacturers to relocate to Vietnam,” Standard Chartered said.

Like HSBC and Singapore’s United Overseas Bank, the international lender forecast the State Bank of Vietnam (SBV) will cut its benchmark refinancing rate by another 50 basis points to 4.0% in this third quarter, and then stay on hold until the end of 2025.

However, Standard Chartered remains uncertain how property developers in Vietnam can arrange payments on interest and principal due on their bonds, as well as fund working capital and projects. The property market may need further liquidity support, as measures so far appear to have only reduced short-term repayment pressure, the bank said.

In terms of forex, the bank forecast USD-VND at 23,400 from the end of 2023 to the third quarter of 2024. Precautionary reserve rebuilding should cap the Vietnamese dong upside in the near term; repricing higher of U.S. Fed terminal rates and a weaker Chinese renminbi also weigh on the dong.

HSBC and two Singaporean banks – UOB and DBS – have also predicted that Vietnam’s GDP growth would accelerate in the last six months of this year

In the first half of 2023, this economy expanded by 3.72% year-on-year, according to the General Statistics Office (GSO).