UBO: Vietnam’s 2022 GDP to Expand 7%

The United Overseas Bank (UOB) has revised up Vietnam’s 2022 GDP growth forecast to 7.0% from 6.5%, assuming no further severe domestic disruptions from Covid-19, and projected growth of around 7.6 – 7.8% in the second half of the year (H2).
July 01, 2022 | 07:23

The Singapore-based bank said the projection was based on the strong set of data in the second quarter of 2022 (Q2) and a historical track record of a generally robust H2 performance, according to VietnamPlus.

It cited data of the General Statistics Office of Vietnam (GSO) as showing that Vietnam’s real GDP growth surprised in Q2, expanding 7.7% year-on-year from 5.0% in Q1, surpassing the UOB’s estimate of 6.0% year-on-year.

The sharp rebound in Q2 GDP was driven by manufacturing activities which accelerated for the 4th straight quarter, and a recovery in services output as it continued to regain its footing since the last contraction in the third quarter of last year.

For the first half of 2022, Vietnam’s GDP rose 6.4% year-on-year on the back of a 9.7% gain in the manufacturing sector and 6.6% in services output. Other monthly data released suggest that activities have generally returned to normal after restrictive COVID-19 measures were eased and borders reopened.

The UOB said inflationary pressures on Vietnam are manageable as the main source of impact is energy related while food prices are stable. However, upside risks are significant given the rapid pace of gains in energy prices which will eventually spread to the rest of the economy, especially if higher prices persist.

With the latest set of data, the bank anticipated an official forecast of 6.0 – 6.5% to be revised higher, although downside risks remain. These include the impact of the ongoing Russia-Ukraine conflict on geopolitical developments, energy and food prices, and supply chain disruptions.

UBO: Vietnam’s 2022 GDP to Expand 7%
The UOB said inflationary pressures on Vietnam are manageable. Photo: VOV

“In addition, the US Federal Reserve (Fed)’s aggressive policy bias could be another source of financial market risk for emerging economies such as Vietnam,” it said.

Amidst these uncertainties and despite a more robust domestic economy, there is room for the State Bank of Vietnam (SBV) to stay patient and keep its policy rate steady for now to support the recovery efforts, especially with inflation within its target range.

As such, the UOB expected the current refinancing rate at 4.0% and rediscounting rate at 2.5% to remain at these record low levels until at least the end of 2022.

The bank also expected Asia’s emerging currencies such as the VND to be weighed as the Fed looks set to front load its rate hikes further in H2. As such, it forecasts the USD/VND to be on a steeper upward trajectory in the months ahead. Its USD/VND forecasts are at 23,400 in the third quarter of 2022, 23,500 in the fourth quarter of this year, 23,550 in the first quarter of 2023, and 23,600 in the second quarter of 2023.

Vietnam become fastest-growing economy in Southeast Asia

UBO: Vietnam’s 2022 GDP to Expand 7%
Vietnam’s GDP growth would be the highest in Southeast Asia.. Photo: vietstock.vn

Though international organisations continuously downgrade their global growth forecasts for this year, many have maintained their projection that Vietnam’s GDP growth would be the highest in Southeast Asia.

The General Statistics Office (GSO) of Vietnam cited the World Bank’s recent report showing that global growth is forecast to slump from 5.7% in 2021 to 2.9% in 2022, a figure which is 1.2% below projections made in January.

This decline can largely be attributed to the damage caused by the Covid-19 pandemic and the negative spillovers from the Russia-Ukraine conflict.

Simultaneously, the World Bank projections for this year’s growth have been revised down for several key global economies. The United States’ growth is anticipated to drop 1.2% to 2.5% compared to the January forecast, while growth in the Eurozone, Japan, and China is forecast to shrink by 2.5%, 1.7%, and 4.3%, respectively.

Meanwhile in Southeast Asia, the Asian Development Bank (ADB) has forecast that GDP growth rates of Indonesia, the Philippines, Thailand, Singapore, and Malaysia would be at 5.0%, 6.0%, 3.0%, 4.3%, and 6.0%, respectively, while that of Vietnam is expected to be the highest at 6.5%.

The Asian bank attributed the strong recovery of the Vietnamese economy in the post-pandemic period to high Covid-19 vaccination coverage, the shift to a more flexible pandemic containment approach, expanding trade, and the enforcement of the Government’s Economic Recovery and Development Programme (ERDP).

Furthermore, the ERDP’s monetary measures will provide additional liquidity to the economy through an expected reduction in the lending rate by 0.5% to 1.0% through credit institutions over this year and next year, with the continued implementation of these measures until 2024.

The State Bank of Vietnam has set the annual target growth rate for credit at 14%. Reaching this target will be aided by interest rate cuts and revived credit demand from businesses./.

According to GSO General Director Nguyen Thi Huong, the country's socio-economic development in the first six months of 2022 has prospered in most industries and fields, especially processing and manufacturing industry; retail sales of consumer goods and services; and exports.

The agriculture-forestry-fishery sector increased 3.02%, contributing 4.56% to the overall growth of the economy.

The industry and construction sector was up 8.87%, making up 46.85%, while the service sector rose by 8.56 percent, contributing 48.59 percent to the general GDP growth, Huong said.

Regarding GDP use, final consumption expenditure increased by 7.32% over the same period last year; accumulated assets rose by 4.57%; exports of goods and services surged 12.33%; imports of goods and services up 4.88%.

In the January – June period, the country's GDP grew by 6.42%, higher than the 2.04% and 5.74% growth rates of the same periods in 2020 and 2021, respectively.

In terms of economic structure in the first two quarters, the agriculture-forestry-fishery sector accounted for 11.05% of the country’s economy; the industry-construction and service sectors made up 39.3% and 40.63%, respectively, the GSO said./.

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