VietNamNet Bridge - In its macro report on Vietnam market outlook in April, HSBC Vietnam lowered its forecast for Vietnam’s 2016 GDP growth from 6.7% to 6.3%.

For 2017, HSBC forecasts a higher growth rate, at around 6.6%, but still lower than the figure projected at the beginning of the year (6.8%). The reason is that Vietnam’s growth in the first quarter 2016 was only 5.6% yoy, much lower than previous expectations.

According to HSBC, the impact of climate change, particularly drought and salinity, has badly affected many of the key economic sectors of Vietnam, affecting the country’s GDP.

Besides, the administrative tightening measures proposed recently will curb credit growth, leading to restricted investment compared to last year.

However, HSBC Vietnam still ranked Vietnam in the group of countries with the highest growth rates in the region. Domestic demand reduced but was still strong and Vietnam’s exports are expected to dominate the global market, to ensure growth in the medium term.

The bank said that the current slowdown has its positive points, which is to create conditions for Vietnam to rebuild the bracket for macroeconomic growth.

HSBC also said that the process of raising interest rates by the State Bank of Vietnam will be postponed in the third quarter 2017, due to weak growth prospects. The stable energy prices mean that inflation will remain at low level in 2016 (the bank cut its forecast for Vietnam’s CPI from 2.9% to 1.6%).

The report added that the current account deficit in 2016 and 2017 will narrow while FDI inflows will be strong while Vietnam’s overseas investment will slow to help keep the overall balance of payments of Vietnam this year as a surplus, enabling the State Bank of Vietnam to strengthen foreign exchange reserves.

Nam Nguyen