Standard Chartered Bank maintained a robust 2024 GDP growth forecast of 6.7 per cent for Việt Nam in its latest macro-economic updates about the Southeast Asian nation.

 

The bank has lowered the country’s 2023 GDP growth to 5.0 per cent year-on-year from the previous 5.4 per cent. The revised forecast would require Q4 growth of 7.0 per cent year-on-year, which may still be challenging.

 

According to the report, the macro indicator shows a tentative improvement; trade has yet to signal a clear manufacturing rebound. However, domestic recovery continues and is likely to strengthen further, with robust retail sales.

 

Construction and accommodation sectors maintain strong growth year to date; manufacturing has started to expand. The external outlook is improving, with the current account surplus rising to 3.5 per cent of GDP in 2024 and from 2.0 per cent in 2023.

 

The inflation forecast for 2023 is revised up to 3.4 per cent year-on-year from 2.8 per cent previously. The Q4 inflation rate is forecast to reach 4.3 per cent (from 2.7 per cent) and is likely to rise higher next year. Inflation may result in search-for-yield behaviour and increased financial instability risks. Notably, education, housing, food, and transport costs have been major contributors to the recent inflation drive.

 

“The medium-term outlook remains promising given Việt Nam’s economic openness and stability. To reinvigorate FDI inflows, Việt Nam needs to resume rapid GDP growth and develop its infrastructure,” said Tim Leelahapan, Economist of Thailand and Việt Nam, Standard Chartered.

 

“The property market may require further liquidity support, as measures so far appear to have only reduced short-term repayment pressure. Low interest rates, new project approvals, and a pick-up in buyer sentiment could help the market,” said Tim Leelahaphan.

 

Earlier, the United Overseas Bank (UOB)’s Global Economics & Market Research Unit had cut the full-year growth forecast for Việt Nam to 5 per cent from the earlier 5.2 per cent.

 

Michael Kokalari, a chartered financial analyst (CFA) and Chief Economist at HCM City-based VinaCapital, forecast that Việt Nam’s GDP will likely grow by less than 5 per cent in 2023 due to lower demand for “Made in Vietnam” products.

 

“We expect Việt Nam’s GDP growth to rebound to 6.5 per cent next year, driven by a recovery in exports, which will, in turn, be closely accompanied by a rebound in Việt Nam’s manufacturing sector output from flat growth in 2023 to 8-9 per cent in 2024, versus the sector’s 12 per cent long-term average growth, pre-COVID.”

 

“Our optimism for a manufacturing-driven recovery of Việt Nam’s GDP growth in 2024 stems from an analysis of the cause of the sector’s problems in 2023, which was an over-accumulation of inventories by US retailers and other consumer firms in 2022,” he explained.

 

Inventories surged by more than 20 per cent year-on-year in late 2022 because firms over-ordered during the COVID-19 supply-chain disruptions of 2021, and because expectations of a post-COVID spending boom did not materialise as retailers and other consumer companies had expected.

 

Instead of purchasing more products when COVID-19 lockdowns were lifted, consumers splurged on services such as travelling and eating out. Consequently, US firms have been working through this excess inventory throughout 2023, with inventory depletion at the fastest pace in almost 10 years; this has been the main factor weighing on Việt Nam’s exports and manufacturing output this year. However, a plethora of anecdotal and high-frequency economic data in the US and in Việt Nam indicates that this phenomenon is now coming to an end, which is the basis for the belief that orders and output from factories in Việt Nam are now recovering, he said. — VNS