HSBC recently raised its forecast for the GDP growth of Vietnam to 6.9%. Mr. Tim Evans of HSBC Vietnam backed up this decision by pointing out that Vietnam’s ratings on world-famous credit rating agencies have been improving continuously.
Moody’s recently upgraded Vietnam’s credit rating to Ba2, a short while after S&P also upgraded the country’s rating. Fitch’s latest credit rating for Vietnam was BB on 28 March 2022 with a “Positive” outlook, and it remains the current rating of Fitch for Vietnam.
Vietnam’s Purchasing Managers' Index (PMI) reached 52.7 points in August, demonstrating a steady improvement in the manufacturing sector. Business conditions have been strengthened for 11 consecutive months.
Vietnam is also expected to become the 10th largest global consumer market in the world by 2030, surpassing both Germany and the UK. Despite global challenges, Vietnam is making great efforts, continuing to achieve, even being a prominent country in the region in terms of GDP growth.
Those have been the reasons for Vietnam’s GDP growth forecast by HSBC to be 6.9%.
In the second quarter of 2022, Vietnam's GDP reached 7.7%, the highest growth rate in the past 11 years, thanks to a broad-based recovery, full reopening, recovery of domestic demand, production continued to increase strongly, and exports reached historic growth.
“Vietnam, a low-middle-income country, is aspiring to become a developed, high-income country by 2045. The upper middle class is expected to grow by an average of 17% by 2030,” said Tim Evans.
Mr. Alain Cany of EuroCham shared the view that Vietnam possesses a positive outlook despite the global developments remaining unstable.
Vietnam’s human resource of 56 million young energetic laborers, who are getting more and more acquainted with technology, is helping the country in becoming one of the largest labor forces worldwide. Given Vietnam's affordable and high-quality labor supply, it is not surprising that foreign investors want to move production to the country.
In addition, manufacturing for export and foreign direct investment are two factors driving Vietnam's economic growth. As of 2021, Vietnam's exports account for 19% of GDP, up significantly from less than 1% in 2010. Vietnam's export market has now surpassed Malaysia and Thailand.
A series of FDI projects are being implemented in Vietnam. LEGO, a member of EuroCham, is investing 1 billion USD in Binh Duong to build the factory. In the future, this will be the first factory in Vietnam and the second factory in Asia of LEGO. Pegatron, Apple's supplier, currently plans to invest up to 1 billion USD in Vietnam. Foxconn has committed to pour 300 million USD to upgrade the production facility in Bac Giang. Samsung will start manufacturing semiconductor components in Vietnam starting in 2023, while Apple plans to produce Apple Watch watches in the country.
The Ministry of Planning and Investment gave a forecast of 7.5% - 8% GDP growth for Vietnam in two possible scenarios. Specifically, Vietnam’s GDP growth in 2022 would reach 7.5% in case the country’s economy encounters difficulties in quarter IV. In the other scenario, provided that there are no sudden changes, and the economy enjoys favorable conditions, the GDP growth rate for 2022 is expected to be about 8%.
Forecasting further into 2023, the Deputy Minister of Planning and Investment, Mr. Tran Quoc Phuong, assessed that Vietnam would face advantages, difficulties, and challenges. However, it is more likely there will majorly be difficulties for two reasons: Global inflation and the Russia – Ukraine conflict.
The global inflation may affect Vietnam’s economic partners coming even into 2023. There may be a chance of recession due to extreme inflation control methods of the world’s major economies. It will take a lot of time to recover from said inflation and possible recession.
As for the Russia – Ukraine conflict, this clash is yet to see an end. The conflict led to a big problem for Vietnam – energy. Since the clash broke out, it has been hard for Vietnam to manage the gasoline prices, not to mention inflation. Such an uncertain situation will be a disadvantage for Vietnam’s economy in 2023.
An additional difficulty is the impact of natural disasters and diseases.
Based on those reasons, the Ministry of Planning and Investment planned three options for Vietnam’s GDP growth target in 2023.
Source: vneconomy, baodautu.vn
Compiled by VietnamCredit