In late 2021 and early 2022, Vietnam’s economic growth was forecast to reach 6.5% or higher. However, with the current development globally and domestically, the forecast given by several organizations for Vietnam was lowered.
On April 5, the World Bank (WB) held an online press conference to launch the East Asia and Pacific Economic Situation Update Report for April 2022. Accordingly, the report analyzes the economic context up to this point and presents the outlook for 2022 for the entire region and each country.
For Vietnam in particular, the World Bank's Chief Economist in charge of East Asia and the Pacific, Mr. Aaditya Mattoo, said that the country is one of the economies that the World Bank has had to sharply reduce growth forecasts.
Mr. Aaditya Mattoo said that in October 2021, the WB forecast that Vietnam's growth would be 6.5% in 2022. However, the WB now forecasted that it would be only 5.3%. In addition, that is only the basic scenario. If the situation turns out worst than the anticipated scenario, it may be only 4.4%.
The World Bank has sharply reduced its growth forecast for Vietnam because of the difficulties that Vietnam has faced when dealing with the Omicron variant, leading to a very high number of new infections. In addition, Vietnam is also greatly affected by the import of oil with a value of up to 3% of GDP. That is not to mention the import of other materials such as iron, steel, etc., which are greatly affected when the import price becomes more expensive.
On a similar note, HSBC recently lowered Vietnam’s economic growth forecast to 6.2% from the previous 6.5% due to the risk of impact from the context of global fuel shortage.
According to HSBC's latest report, the factors that hinder Vietnam's growth are still there, making the bank cautiously reduce its forecast.
Specifically, a series of challenges emerged in the context of rising world fuel prices. This causes fuel costs to increase, adversely affecting the trade balance. In March alone, crude oil imports doubled while gasoline imports quadrupled the monthly average over the same period last year.
Due to the impact of rising oil prices, the bank forecasts that Vietnam will have another year of current account deficit, albeit at a level of about 0.2% of GDP. With external difficulties in consideration, HSBC has also slightly increased its forecast for the USD/VND exchange rate in the short term. The forecast by the end of the year is still at 22,800 VND.
Retail sales have not recovered strongly, with only 2.5% in the first quarter compared to the same period in 2021. Part of the reason is the still-weak labor market. Meanwhile, rising oil prices increased the cost of living, slowing the recovery of private consumption.
HSBC slightly lowered the growth rate but said that with the new GDP forecast, it is likely that Vietnam will still be one of the countries with outstanding growth in the region this year. According to the government's target, GDP 2022 is in the range of 6-6.5%.
According to HSBC, Vietnam has had a good start in 2022 with GDP in the first quarter growing steadily at over 5% YoY, thanks to a broad-based recovery. The external growth momentum has picked up speed.
In the latest report recently released by the Asian Development Bank (ADB) on April 6, Vietnam's economy is expected to recover at 6.5% in 2022 and grow stronger at 7% in 2023. The basis for this forecast is high vaccination rates, increased trade, and continued expansion of fiscal and monetary policies.
Vietnam's economic growth report in the first quarter of 2022, released by UOB on April 6, shows that Vietnam's growth prospects in 2022 will be heavily influenced by developments around the Russia-Ukraine tension and the increase in prices of energy commodities.
Another organization, ADB, predicts that Vietnam still faces some key risks. Accordingly, COVID-19, if not eased, may prevent the economy from returning to normal this year. Meanwhile, the global economy tends to slow down with geopolitical uncertainty that comes from Russia-Ukraine tensions. Internally, Vietnam's financial and monetary market is also revealing some problems in 2021 and 2022 such as problems with bad debt or corporate bonds.
UOB shared the belief that Vietnam’s economic growth in 2022 can be at 6.5%, in line with the Government’s aim.
Compiled by VietnamCredit