High growth forecasts

The World Bank (WB) has forecast that Vietnam’s economic recovery is likely to accelerate this year as its gross domestic product (GDP) is expected to rise 5.5%.

The forecast was made based on the assumption that the Covid-19 pandemic will be brought under control and the local economy will recover strongly. The inflation this year was projected at 3.5%-3.6%, higher than the figure of 1.8% in 2021.

The outlook, however, is subject to serious downside risks, particularly the unknown course of the pandemic. Weaker-than-expected domestic demand could weigh on the recovery. In addition, many trading partners are facing a dwindling fiscal and monetary space, potentially restricting their ability to further support their economies if the crisis persists, which could slow the global recovery and weaken demand for Vietnamese exports.

Earlier, Standard Chartered Bank forecast that Vietnam’s recovery will accelerate markedly in 2022, with its GDP growing by an estimated 6.7%. Vietnam’s positive medium-term outlook remains intact and the economy should continue to bounce back in 2022 as the global pandemic situation improves, the bank said in its Vietnam-focused macro-economic report titled “Vietnam – Moving back to high growth.”

However, inflation may become more of a concern for Vietnam. A prolonged Covid-19 outbreak could lead to supply-driven inflation risks. The inflation forecast for Vietnam in 2022 is 4.2%.

HSBC expects Vietnam to return to solid growth of 6.5% in 2022, although the spread of Omicron poses risks locally and globally.

The bank’s economists believed Vietnam would return to a firm broad-based growth track after concluding 2021 with a strong rebound from its worst contraction. On the one hand, manufacturing and exports are expected to continue to lead, partly supported by resilient FDI commitments.