In the latest economic growth in Q2/2023 report of Vietnam, the bank said that weak export activities with their possible impacts on domestic demand, the US Federal Reserve (Fed)’s halting interest rate hikes in June, and possible further rate cut in 2024, as well as confidence in the stable exchange rate despite previous interest rate cuts drive the prospect of Vietnam's next rate cut this year.

As a result, UOB predicts a further 100 basis points reduction in interest rates in the third quarter of 2023 to 3.5% for the refinancing rate before the State Bank of Vietnam (SBV) pauses to assess the impacts.

Based on statistics from the General Statistics Office (GSO), the bank’s experts said Vietnam's real GDP growth rate in the second quarter of 2023 increased to 4.14% over the same period of last year, from 3.28% in the first quarter of 2023. This result exceeded the general forecast of 3.8% but was lower than the expected rate of 5.9%.

The main driver of the continued dismal growth results was a drop in manufacturing activity and external demand. Overall, in the first half of 2023, Vietnam's economy grew by 3.72% year-on-year, much lower than the 6.46% pace in the first half of 2022 as well as the official growth target of 6.5%.

Regarding inflation, Vietnam's consumer price index dropped sharply to 2.4% in the second quarter of 2023 from 4.18% in the first quarter of 2023, lower than the Government's target of 4.5%. Core inflation excluding prices of food, energy, and other public services fell to 4.48% in the second quarter from the 5.01% in the first quarter of 2023, creating an opportunity for the SBV to loosen monetary policy further in the first half of the year.

According to UOB, with the growth rate in the first six months of 2023 much lower than the official growth target for the year, it will be difficult to keep up with the 6% forecast that the bank gave before. As a result, UOB's Global Market and Economic Research has revised its GDP growth forecast for Vietnam in 2023 to 5.2%, from the previous forecast of 6%./. VNA