Economists pointed out that the country’s economic growth has remained resilient. Indeed, exports enjoyed annual growth of 14.9% in the first 10 months of the year, while imports grew by 16.8%, with electronics exports and imports continuing their recovery.

The manufacturing sector experienced solid growth, and relatively accommodative monetary policy may have also contributed to the economic recovery year-to-date.

Foreign investment appetite remains strong, as indicated by inward FDI flows. Disbursed FDI increased by 8.8% on-year, while pledged FDI rose by 1.9% in the same period.

The manufacturing sector accounted for 62.6% of total pledged FDI during that period, while the property sector’s share stood at 19.0%, increasing from a year earlier.

Tim Leelahaphan, economist for Thailand and Vietnam of Standard Chartered, said “We expect the State Bank of Vietnam (SBV) to hike rates by 50 basis points (bps) in the second quarter next year.” He added that the Government’s desire for stronger economic growth may support low interest rates for now.

With inflation likely to rise again starting in the second quarter of next year, the economist expects rate normalisation to occur during this period.

Fed moves will also be key to the SBV’s policy decisions, he said, adding that lower US$ rates may help to reduce capital outflows, while a sustained trade surplus and strong tourism should support the VND. “However, low import cover remains a challenge,” he noted.

Standard Chartered forecasts Fed rate cuts, which should lead to a softer-US$ bias over the next few quarters, will result in exchange rate of US$/VND at 25,250 by the end of the year before increasing to 25,450 by the second quarter of next year.

VOV