Standard Chartered cuts Vietnam growth forecast to 6.5%

In a release Thursday the British bank said it amended the forecast it had made in January of 7.2% growth after considering external factors more carefully with Vietnam’s macro indicators slowing down in the last four months.

Exports have declined by 11.8% year-on-year, and the trade surplus is US$6.4 billion. Inflation for April was 2.8%, the third consecutive month of decline, though core inflation – not including food and energy prices — was 4.6% as retail sales jumped by 11.5%.

FDI fell by 17.9% to $8.9 billion. Imports decreased by 15.4% year-on-year.

“Vietnam imports a lot, so import indicators going down considerably shows that economic activity is slowing down despite strong domestic consumption”, Tim Leelahaphan, the bank’s economist for Thailand and Vietnam, said.

Many other international financial institutions have also adjusted their Vietnam growth forecasts downward.

The IMF has reduced it from 6.2% to 5.8%, the World Bank from 6.7% to 6.3%, and the ADB from 6.7% to 6.5%.

Vietnam’s economic growth this year is likely to be constrained by the global economic downturn, monetary tightening in developed countries, rising commodity prices, and geopolitical issues.

The government targets 6.5% growth, but there are challenges ahead with the GDP only growing by an annualized 3.32% in the first quarter.

Minister of Planning and Investment Nguyen Chi Dung expressed concern about growth at a recent meeting, saying to achieve the target the economy needs to grow at 6.7%, 7.5% and 7.9% in the next three quarters.

Standard Chartered predicted that the State Bank of Vietnam would reduce the refinancing rate by 0.5 percentage points to 5% by the end of the second quarter and maintain that rate until the end of 2025.

But it did not rule a hike in rates, especially towards the end of the year, due to the possibility of the central bank focusing more on stability than growth.

“Since the start of 2023 the SBV has turned to supporting the economy’s recovery,” Leelahaphan said.

“Besides cutting interest rates, it also helped struggling businesses by giving them more time to deal with illiquidity.”

Since April loan terms have become easier, with banks rolling over debts for up to 12 months and cutting interest rates.

But the real estate market needs more support, with all measures taken until now only helping relieve short-term loan repayment pressure, he added.