Standard Chartered has forecast that Vietnam will remain the fastest-growing ASEAN economy in the near term, with 2019 growth projected at 6.9 per cent. The FDI-driven manufacturing sector, which is poised for a fourth consecutive year of double-digit growth, will continue to be a key growth driver.
The forecast is highlighted in the bank’s recently published Global Focus – Economic Outlook report for the third quarter of 2019, entitled “The dovish wave grows”.
“Vietnam’s growth prospects remain strong, with macroeconomic conditions staying stable in the first half, which is likely to continue towards year-end,” said Mr. Chidu Narayanan, Economist, Asia, at Standard Chartered Bank. “We expect growth to accelerate mildly in the second half, from 6.7 per cent in the first.”
According to the latest macroeconomic research, FDI inflows will remain robust this year, particularly in the manufacturing sector, totaling $18 billion. Vietnam’s export growth is likely to remain steady and outperform its peers.
Electronics exports, which make up about one-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 per cent on slowing capital-goods imports, which should keep the 2019 trade balance in surplus.
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 the second half, averaging 2.8 per cent compared to 2.6 per cent in the first half, and core inflation, which excludes prices of food, energy, healthcare, and education, will edge up to 2 per cent for the year.
Standard Chartered’s economists expect unchanged policy rates in 2019 and mild appreciation of the Vietnam dong (VND). They anticipate the currency will remain supported near-term by a stable current account surplus and strong FDI inflows, and forecasts the USD-VND exchange rate at 23,100 by end-2019 and VND23,000 in mid-2020.
Source: Vietnam Economic Times