World Bank raises Vietnam GDP forecast to 5.8%

The World Bank on Tuesday raised Vietnam’s GDP prediction this year to 5.8% from 5.3% in its April forecast.

This is a significant improvement against the bank's previous forecast of 4% for Vietnam’s GDP in 2022 in the worst-case scenario.

The revision is derived from a revival of activity supported by the removal of Covid-related restrictions in the country, the World Bank's Global Economic Prospects report noted. Vietnam's economic expansion is expected to strengthen further to 6.5% in 2023 and 2024.

"The Vietnamese economy has been rapidly recovering since the beginning of the year. The impact on its economic growth can be minimized if the government offers a drastic support package through fiscal policy. Monetary policy must be eased, but caution should be maintained in order to control risks in the financial sector," it said in the previous report.

In the opposite direction, the bank slashed its global growth forecast by nearly a third to 2.9% for 2022, warning that the Russia-Ukraine conflict has compounded the damage from the Covid-19 pandemic, and many countries now faced recession.

The war in Ukraine had magnified the slowdown in the global economy, which was now entering what could become "a protracted period of feeble growth and elevated inflation," it noted, warning that the outlook could worsen.

The growth rate of East Asia and the Pacific is expected to decelerate to 4.4% in 2022 before rebounding to 5.2% in 2023.

The bank also predicted that emerging markets and developing economies would grow at 3.4% in 2022, down from 6.6% in 2021 and well below the annual average of 4.8% seen in 2011-2019. After growing by 8.1% in 2021, China's GDP is seen to expand by just 4.3% in 2022.

HSBC in early April revised down Vietnam’s GDP forecast from 6.5% to 6.2% due to impacts of the global fuel shortage. Standard Chartered maintained its 2022 forecast at 6.7%, as economic indicators recover on a large scale. The recovery may accelerate substantially in late second quarter of 2022 as domestic demand and tourism recover, it added.

Credit rating agency S&P Global Ratings in late May revised up Vietnam’s long-term sovereign credit rating to BB+, a "stable" outlook.

Vietnam is one of only two economies in the Asia-Pacific region to have been upgraded since the beginning of the year, the other being Taiwan.

The S&P upgrade was based on Vietnam’s steady economic recovery prospects following the progressive lift of domestic and cross-border mobility restrictions, outstanding improvement in vaccination rates, and flexible shift in Covid-control policy.

The agency predicted Vietnam's real GDP growth of 6.9% in 2022, with a long-term trend of 6.5-7% from 2023 onward.