​Vietnam's mid-term economic outlook shines, yet inflation concerns mount: StanChart experts

​Vietnam's mid-term economic outlook shines, yet inflation concerns mount: StanChart experts

Vietnam's economic prospects are still promising in 2024 and the medium term, but the country could see a rise in inflation, Standard Chartered Bank experts said at a media engagement in Ho Chi Minh City on Thursday.

People go shopping at a mall in Thu Duc City, Ho Chi Minh City. Photo: Quang Dinh / Tuoi Tre

At the event held to present Standard Chartered’s 2024 Global & Vietnam Outlook to a small group of journalists including Tuoi Tre News' reporter, Tim Leelahaphan, economist for Vietnam and Thailand, Standard Chartered Bank, said the bank predicted Vietnam’s gross domestic product (GDP) growth at 6.2 percent in the first quarter of this year and 6.9 percent in the second half.

In total, the country’s GDP was expected to expand 6.7 percent for the whole year, which Leelahaphan said is “achievable and understandable.”

Vietnam will be cautious, at least in the first half of the year, as there are still some uncertainties and global headwinds.

He pointed out that retail sales and industrial production have stayed robust despite the recent moderation.

Exports and imports are also starting to recover, though electronics-related trade remains tentative.

To maintain rapid growth and competitiveness, Vietnam needs to upgrade infrastructure and prepare to lower carbon emissions, he said, adding that the Southeast Asian country may see an increase in price pressure and inflation later this year.

Inflation is anticipated to pick up to 5.5 percent in 2024 from 3.3 percent in 2023.

Standard Chartered Bank forecast monetary loosening has likely ended, given Vietnam’s economic recovery is starting to gain momentum.

The bank expects rates to hold steady despite a possibility of another rate cut.

Refinancing rates are believed to stay on hold at 4.5 percent until the end of the third quarter of this year before a 50-basis-point hike in the last quarter.

“The State Bank of Vietnam might turn more tightening later this year," Leelahaphan remarked.

"It may keep rates at a low level in the first half to boost the economy and support businesses.

"But once price pressure comes into play in the second half, the central bank would start gradually, slightly raising rates.

“We expect the central bank to strike a delicate policy balance between supporting the economy's recovery and combating rising inflation and currency weakness.

"Inflation and a wide income-spending gap may result in a search-for-yield behavior and financial instability risks."

Leelahaphan said FDI inflows into Vietnam are getting improved.

“According to economic data, the country has started to see a rise in FDI,” the executive said.

Vietnam received foreign investment commitments worth US$36.6 billion last year, the third-highest since 2008, according to the Foreign Investment Agency under the Ministry of Planning and Investment.

The country should also focus on the quality of investment, which involves sustainability and diversification, not only manufacturing.

Vietnam may attract FDI in other sectors and from more origins, not only Singapore and some North Asian countries.

“We have [recently] seen a rise in FDI from China,” Leelahaphan noted, adding that quality and diversification are key takeaways for Vietnam in 2024.

Furthermore, China is one of the main markets for Vietnamese exports.

“The top market is still the U.S. but the second one now is China. The U.S. accounts for 30 percent of total exports from Vietnam, [and] China, 20 percent,” the StanChart economist said.

Earlier at the media briefing, Edward Lee, chief economist for ASEAN and South Asia at Standard Chartered Bank, provided insights into the global economic outlook.

Lee noted that despite ongoing challenges, global growth continues to face persistent headwinds.

Inflation has moderated but it is still above the pre-COVID average.

The tight global monetary policy will continue weighing on growth.

Global trade is forecast to bottom and no strong rebound is expected, Lee added.

Michele Wee, CEO of Standard Chartered Vietnam, said, "Vietnam, with a promising medium-term outlook, holds tremendous potential for growth and FDI attraction.

“As a leading international bank with a 120-year presence in Vietnam, we're proud to empower businesses through knowledge sharing and remain fully committed to supporting clients and partners in navigating the exciting journey ahead.

"These are among our ongoing efforts to support Vietnam’s sustainable development and to foster a thriving business environment in Vietnam."

Tuoi Tre News