Standard Chartered has revised down its GDP growth forecast for Vietnam in 2021 from 4.7 to 2.7 per cent, reflecting the unexpected contraction of 6.2 per cent on-year in the third quarter.
|Standard Chartered remains positive on Vietnam’s growth prospects next year |
The bank expects recovery to accelerate in 2022 and maintains its 2022 growth forecast at 7.0 per cent.
“While we expect growth to start recovering in the fourth quarter of 2021, this hinges on progress towards reopening businesses. We continue to expect a post-COVID-19 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 to keep its policy rate on hold at 4.0 per cent 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-19 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.
By Standard Chartered