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Standard Chartered Lowers Vietnam’s 2021 Growth Forecast to 2.7%, Maintains 2022 Forecast at 7%

Diep Nguyen
BizLIVE -

The economist anticipates the State Bank of Vietnam (SBV) to keep its policy rate on hold at 4.0% to support credit growth and remain vigilant against inflation risks, which are driven by supply-side factors. 

Standard Chartered Lowers Vietnam’s 2021 Growth Forecast to 2.7%, Maintains 2022 Forecast at 7%
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Standard Chartered has revised down its GDP growth forecast for Vietnam in 2021 to 2.7% from 4.7%. This reflects the unexpected Q3 contraction of 6.2% y/y. The Bank expects the recovery to accelerate in 2022 and maintains its 2022 growth forecast at 7.0%.
“While we expect growth to start recovering in Q4-2021, this hinges on progress towards reopening businesses. We continue to expect a post-COVID growth acceleration but turn more cautious pending clearer signs of recovery. Vietnam’s pandemic management is crucial to the near-term outlook.” said Tim Leelahaphan, Economist for Thailand and Vietnam, Standard Chartered.
The economist anticipates the State Bank of Vietnam (SBV) to keep its policy rate on hold at 4.0% to support credit growth and remain vigilant against inflation risks, which are driven by supply-side factors. 
Standard Chartered sees downside risks to its growth forecast – and a potential interest rate cut – if the economic impact of Vietnam’s COVID outbreak lasts beyond October. Such a scenario could affect the external position. An extended outbreak, with containment measures in place for longer, could have both short-term and longer-term effects on Vietnam’s economy, exacerbating vulnerabilities such as rising inflation and limiting fiscal room for development. However, Vietnam’s external position is resilient in both the short and medium term.
Viet Nam’s economic growth is expected to slow down due to a resurgence of the coronavirus pandemic (COVID-19) that has tightened the labor market, lowered industrial output, and disrupted agricultural value chains, according to a report released today by the Asian Development Bank (ADB).
The country’s economy is expected to grow 3.8% this year and 6.5% in 2022, according to the Asian Development Outlook (ADO) 2021 Update. Growth picked up in the first half of 2021, largely because of higher trade volumes, but slowed down in the second half of the year as the fourth wave of the pandemic took a toll on business and the labor market.
Inflation will be muted in 2021 and 2022 due to the slower growth.
“The prolonged COVID-19 pandemic and extended lockdowns have weakened consumption and investment, hampering Viet Nam’s growth prospects," said ADB’s Country Director for Viet Nam Andrew Jeffries. “But the Vietnamese economy will bounce back if the COVID-19 pandemic is brought under control by the end of 2021 and 70% of the country’s population are vaccinated by the second quarter of 2022.”
ADB remains bullish on the country’s prospects in the medium and long term. 
Growth could be aided by a revival of domestic demand, an acceleration in the disbursement of public investment, and an expansion to new export markets thanks to multiple free trade agreements and the expected global economic recovery.

DIEP NGUYEN

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