VinaCapital lowers Vietnam growth forecast, raises concern over VND depreciation
VinaCapital, a leading investment fund in Vietnam, has revised down its country GDP forecast by 1% to 6.5%, and raised concerns about a 1-2% depreciation in the VND's value.
Vietnam’s economy was less likely affected by the Russia-Ukraine war due to the minimal economic linkages between Vietnam and Russia. But a combination of soaring energy prices, inflation, and a sudden spike in the USD’s value have prompted the fund to lower its expectations, it said in a report.

Vietnam-Singapore Industrial Park (VSIP) in Hai Duong province, northern Vietnam. Photo courtesy of the company.
Vietnam has a GDP energy deficit of 1% despite producing a considerable amount of gas and oil. “This energy deficit - in the face of soaring energy prices - coupled with the fact that higher oil prices will divert some of local consumers’ incomes from spending on consumer goods to spending on petrol will weigh on GDP growth somewhat this year,” Michael Kokalari, VinaCapital’s chief economist, noted.
VinaCapital research shows Vietnam’s retail gasoline prices were up nearly 20% at the starting time of the Russia-Ukraine conflict, and are likely to increase by 30% in the coming months, in line with soaring global prices.
ADB in March anticipated Vietnam’s growth rate to converge to its pre-pandemic level of 6.5-7% in 2022 thanks to “fast vaccination progress, sustained global economic recovery, and certain key drivers of economic growth which include the economy’s digital transformation.” In the same month, IMF estimated the country’s economic expansion at 6.6%.
World Bank’s forecast in January was 5.5%, with an expectation of good disease control and a strong recovery in Vietnam’s economy. The bank is yet to have an update, if any, since the Russia-Ukraine war started on February 24.
Previously, on February 18, Tim Leelahaphan, an economist for Thailand and Vietnam at Standard Chartered, predicted that the Southeast Asia country’s economy would recover strongly in 2022, beginning at the end of the first quarter. The growth is expected to be 6.7% in 2022 and 7% in 2023.
Risks for Vietnam currency
VinaCapital believed that the risk of a further spike in the value of the USD could cause major disruptions in the foreign exchange market, resulting in a 1-2% devaluation of VND.
The Russia-Ukraine conflict and its consequences such as cutting Russia out of the SWIFT system have pushed up the value of the USD/DXY index by 1.5%.
However, Kokalari believed the Vietnamese currency’s depreciation is less likely to exceed 2% due to its fundamental strengths, and “because the US Federal Reserve would likely intervene to calm the currency markets if the situation deteriorates by more than anticipated.”
Prior to the Ukraine crisis, the fund had predicted the value of VND would rise by 2-3% in 2022 as primary factors that sustained the VND’s value remained robust in 2022.
“FDI inflows were up about 8% year-on-year in the first two months to $2.7 billion, and Vietnam’s trade surplus is likely to rebound from 1% of GDP in 2021 to the 4-5%/GDP surpluses that were typical in recent years, going forward," the fund had noted.
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