Standard Chartered Expects Vietnam’s Recovery to Gain Momentum in the Next Quarter

In its latest marco-economic report on Vietnam titled “Vietnam – Recovery to gain momentum in Quarter 2”, Standard Chartered Bank maintains its 2022 GDP growth forecast for Vietnam at 6.7%, as the recent bounce in economic indicators have become more broad-based. The recovery is likely to accelerate markedly in late Quarter 2 (Q2) 2022 as domestic demand and tourism recover. Short-term uncertainty prevails, particularly around the tourism recovery and pandemic risks.

“The government lifted its quarantine requirement for international arrivals in mid-March. We think the reopening of tourism, which accounts for close to 10% of GDP, is the key development to watch in Q2-2022 after a two-year closure.” said Tim Leelahaphan, Economist for Thailand and Vietnam, Standard Chartered.

According to Standard Chartered’s economists, Vietnam remains a manufacturing hub and a key link in the global supply chain despite geopolitical and pandemic-related challenges. Inward FDI has resumed growth this year after contracting in 2021. The Bank expects this to continue, particularly in sectors such as manufacturing and electricity, gas, and air conditioner supplies.

“Foreign investors remain the key driver of Vietnam’s contribution to the global supply chain. Several major global tech companies have shifted (or made plans to shift) production to Vietnam from China in recent years to persify their supply chains. Vietnam remains attractive as a regional manufacturing hub for sectors including electronics, textiles, garments and footwear.” added Leelahaphan.

Standard Chartered Bank maintains its 2022 and 2023 inflation forecasts of 4.2% and 5.5%, respectively. Supply-side factors pose upside risks to inflation, particularly given the ongoing

geopolitical situation. Over the medium term, demand-push inflationary factors are likely to kick in as the economy recovers. The Bank holds a constructive view on the VND, driven by a supportive external balance. Vietnam’s Current Account is likely to remain in a surplus this year, despite higher commodity prices, amid a recovery in tourism. The Bank forecasts USD-VND at 22,300 by end-2022 and 22,000 by end-2023.