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Standard Chartered Bank expects Vietnam’s economy to grow 7 per cent in 2018, higher than its previous forecast of 6.8 per cent, with all domestic engines firing together. Manufacturing and construction are likely to remain the fastest-growing sectors.
The forecast is highlighted in the bank’s recently published Global Focus report for the third quarter of 2018, entitled “Fattening Tail Risks”.
“We are positive on Vietnam’s growth medium-term on strong manufacturing activity as FDI inflows to manufacturing remain strong,” said Mr. Chidu Narayanan, Economist, Asia, at Standard Chartered. “We believe that Vietnam will remain one of the fastest-growing economies in Asia in 2018.”
According to the latest macroeconomic research report, FDI inflows are set to remain high this year, led by manufacturing, which makes up close to 50 per cent of inflows. Disbursed FDI rose to $6.75 billion in January-May, higher than in the same period last year. The bank expects both registered and disbursed FDI to be close to $15 billion this year; unchanged from its previous forecast.
Its economists also forecast a mild trade surplus for the remainder of the year on strong export growth and slowing import growth. Electronics exports are likely to remain robust on strong demand for components, particularly OLED displays used in mobile devices, and are expected to grow by over 20 per cent.
The study also suggests that the State Bank of Vietnam (SBV) is likely to remain accommodative in the near term to support growth, despite rate hikes from other major central banks. Standard Chartered expects unchanged policy rates in 2018 and a mild devaluation of the Vietnam dong (VND). Specifically, it anticipates a mild move higher in the USD-VND rate during the quarters ahead and revised its forecast up to VND22,950 per dollar for the end of the third quarter and VND23,000 for end-year.
Meanwhile, the latest economic update on Vietnam from the World Bank, entitled Taking Stock and released in Hanoi last month, anticipates Vietnam’s GDP growing 6.8 per cent in 2018 while observing that challenges remain in maintaining growth momentum.
The report noted that recent growth was driven by a cyclical increase in global demand as well as a recovery in investment from the private sector and foreign investors and an ongoing shift of labor away from agriculture into the more productive manufacturing and service sectors.