In its report released recently, the bank forecast Vietnam’s GDP is likely to accelerate by 7.2% in 2023 before slowing down to 6.7% in 2024. The bank’s 2023 projection is 0.7% higher than the Government target approved by the National Assembly.  

Economic experts agree that the 6.5% growth target is a great challenge for Vietnam when the global economy is at risk of recession. Domestically, inflationary pressure remains high, while businesses still find it difficult to maintain and expand production.

But Standard Chartered still believes in Vietnam’s strong growth potential in the medium term, said Tim Leelahaphan, Standard Chartered economist for Thailand and Vietnam.

Although some major macro indicators began to slow down in the fourth quarter of 2022, he said they remained strong. Besides, retail sales grew well in the second half of 2022, fueling confidence in the domestic market.

The trade balance is expected to be improved, with exports to face global challenges and imports likely to decline. Disbursed FDI is set to grow further, but the outlook will depend on the global economy.

The bank said it sees inflation a threat to Vietnam’s continued recovery in 2023. Inflation is projected to increase throughout the year, reaching around 6% in the final months of the year and averaging 5.5% in both 2023 and 2024. The figure is higher than the 4.5% target set by the government for this year.

Fiscal deficit is likely to continue in 2023 that could prompt inflation to rise during the year, according to the financial institution.

Standard Chartered also expected the State Bank of Vietnam would raise interest rates by 100bps in the first quarter and keep them till the end of 2024 to maintain stability.

The local currency (VND) has recovered strongly in recent weeks. However, the appreciation rate of this currency may slow down due to the impact of difficulties ahead. The State Bank of Vietnam is anticipated to replenish foreign exchange reserves this year.

The improvement of the current account and the recovery of tourism is expected to support the local currency. The US$/VND exchange rate is forecast to stand at 23,400 by the end of 2023 and 23,000 by the end of 2024.

Source: VOV