Banks backing GDP target

Standard Chartered recently delivered its forecast that Vietnam’s GDP growth to recover moderately to 5.5 per cent in 2013 after slowing in 2012 to its weakest rate since 2000 on a tight monetary money policy and government challenges in managing state-owned companies.

Investment and exports are likely to lead the rebound. “Vietnam’s exports have performed well during the latest global economic downturn,” stated the foreign bank.

Electronics exports doubled in the first nine months of 2012, outperforming Asian peers.

“We expect the shift of manufacturing to Vietnam from other developing countries to continue to benefit its trade sector,” stated Standard Chartered adding that free trade agreements currently under negotiation are also likely to favour a continued improvement in external trade in the coming years.

Investment is like to regain momentum in 2013 given the government’s efforts  to attract foreign investment in infrastructure.

An expected shift in global manufacturing towards lower-cost centres such as Vietnam is also likely to boost inward investment, said Standard Chartered.
 
However, the bank named credit growth and the financial sector’s high non-performing loan ratio as big issues for the sector.

The State Bank estimated the non-performing ratio at about 8-10 per cent while the market’s estimated is higher at 15-20 per cent.

The government and the central bank have both signaled that they will tackle this issue.

In March, the prime minister approved a bank restructuring plan extending to 2015. Accordingly, the central bank has promised to cut the bad loan ratio to 3 per cent in 2015.

“While these are positive signals, details on the execution of these plans are still lacking,” said Standard Chartered.

Meanwhile, ANZ Vietnam also said Vietnam’s domestic activity remained weak, weighed down by ongoing issues in the banking system.

“Credit growth is being weighed down by  non-performing loans in the banking system, which the State Bank estimates to be around 8.8 per cent of total loans as of  September30,” commented ANZ Vietnam.

The State Bank has held policy rates unchanged for nearly seven months. However, persistently weak demand, exacerbated by issues in the banking system, are keeping GDP growth in the mid-single digits, below the government’ target.   

HSBC forecasted that Vietnam’s GDP in 2013 was 5.3 per cent, a little bit lower than Vietnam government’s growth target of 5.5 per cent GDP in 2013.