International financial institutions have upgraded their forecast of Vietnam’s GDP growth for 2022 following a bullish second-quarter growth. The General Statistics Office reported last week that Vietnam’s growth from April to June was at its fastest pace since 2011, expanding 7.7% year on year.
The International Monetary Fund on Thursday put the Southeast Asian country’s growth at 6%, one of the highest growth forecasts among economies. IMF executive board also praised Vietnam’s policy support during the tight lockdowns in 2021, saying recovery is underway and high-frequency indicators point to stronger momentum going into the second half of 2022.
Lender HSBC also made an optimistic projection, raising Vietnam’s GDP growth rate forecast to 6.9% from 6.6%. The bank reported Wednesday that the country’s successful return to normalcy had paved the way for manufacturing, retail sales, and services to soar. Vietnam’s full reopening in March, timed perfectly as other countries restarted international trade and travel, was also a major driving force.
Meanwhile, Singapore-based United Overseas Bank (UOB) revised Vietnam’s 2022 GDP growth forecast to 7.0% from 6.5%, with an estimated growth of around 7.6-7.8% in the year's second half. It said the projection was based on the solid set of data in the second quarter of 2022 and a historical track record of a generally robust second-half performance.
The national government’s projections are even more optimistic. The Ministry of Planning and Investment said GDP would likely expand by around 7% in 2022, 0.5% higher than the National Assembly’s preset goal.
With this scenario, the economy needs to expand 9%in the third quarter and 6.3% in the last quarter this year, said Minister Nguyen Chi Dung at the Cabinet meeting in Hanoi on July 4.
Vietnam posted a GDP growth of 2.58% in 2021.
Take cautious approach
The optimistic projections for Vietnam’s growth rate are based on the country’s Q2 performance and its track record of economic resilience in the past two years amidst the pandemic.
However, global financial institutions said vigilance and a cautious approach are needed to beat market fluctuations, territorial disputes, disrupted supply chains, and political factors. High fuel and commodity prices may affect consumer spending and trade balance.
“Given elevated global oil prices, we expect upward inflation pressures to persist," HSBC said. Inflation could hit 3.5% this year and exceed 4%from the last quarter to the second quarter of next year.
The IMF also emphasized that China’s hardline zero-COVID policy, which severely affects manufacturing, supply chains, and tourism, poses substantial risks to Vietnam’s growth.
“The labor market recovery is lagging, with sizeable underemployment, small and medium-sized enterprises remain vulnerable, problem loans are rising, real estate and corporate bond market risks are elevated, and the pandemic exacerbated longstanding structural challenges,” it added.
Noting that risks are to the downside, IMF called for agile policymaking, proactively adjusted to the pace of the recovery and evolution of risks, and continued efforts to boost domestic private investment and enhance social safety nets.