Vietnam is forecast to remain the fastest-growing ASEAN economy in the near term, with 2019 growth being projected at 6.9%, Standard Chartered Bank has said in its latest note.
A street in Hanoi's Old Quarter. Photo: Minh Tuan
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“Vietnam’s growth prospect remains strong, with macro-economic conditions staying stable in H1 which is likely to continue towards year-end. We expect growth to accelerate mildly in H2 from 6.7% in H1,” said Chidu Narayanan, economist for Asia at Standard Chartered Bank.
According to the latest macro-economic research report, FDI inflows will stay robust this year, particularly to the manufacturing sector, totaling US$18 billion.
FDI approvals totaled US$20.2 billion in the first seven months this year, down 13.45% year-on-year. Meanwhile, actual FDI totaled US$10.55 billion in the period, representing an increase of 6.63% year-on-year, according to statistics of the Foreign Investment Agency (FIA) under the Ministry of Planning and Investment.
Vietnam’s export growth is likely to remain steady and outperform peers. Electronics exports, which make up about a third of the total, are likely to be less supportive than in recent years due to slowing external demand and lower semiconductor prices. Improving ‘traditional’ exports – textiles and agriculture – should continue to take up some of the slack.
Import growth is expected to remain close to 10% on slowing capital-goods imports; this should keep the trade balance in surplus in 2019, the bank said.
The study also suggests that the State Bank of Vietnam will remain accommodative in the near term to support growth, with still-modest inflation giving it sufficient space.
Standard Chartered Bank forecasts that inflation will pick up modestly in H2, averaging 2.8% in comparison to 2.6% in H1 and core inflation, which excludes prices of food, energy, health care and education services, will edge up to 2% in 2019.
Standard Chartered’s economists expect unchanged policy rates in 2019 and mild appreciation of the Vietnamese dong (VND). They anticipate that VND should remain supported near-term by a stable current account surplus and strong FDI inflows and forecast the USD/VND rate at 23,100 at end-2019 and 23,000 in mid-2020.
