“Vietnam’s growth prospect remains strong, with macroeconomic conditions staying stable in the first half which is likely to continue towards year-end. We expect growth to accelerate mildly in the second half from 6.7 per cent in the first half,” said Chidu Narayanan, economist for Asia at Standard Chartered Bank.
The FDI-driven manufacturing sector, which is poised for a fourth consecutive year of double-digit growth, will continue a key growth driver.
The forecast is highlighted in the bank’s recently published Global Focus – Economic Outlook report for quarter 3, 2019, entitled 'The dovish wave grows'.
According to the report, FDI inflows will stay robust this year, particularly to the manufacturing sector, totaling $18 billion. Vietnam’s export growth is likely to remain steady and outperform peers. Electronics exports, which make up about a third of the total, are likely to be less supportive than in recent years due to slowing external demand and lower semiconductor prices. Improving ‘traditional’ exports – textiles and agriculture – should continue to take up some of the slack. Import growth is expected to remain close to 10 per cent on slowing capital-goods imports; this should keep the trade balance in surplus in 2019.
The study also suggests that the State Bank of Vietnam will remain accommodative in the near term to support growth, with still-modest inflation giving it sufficient space. Standard Chartered Bank forecasts that inflation will pick up modestly in the second half, averaging 2.8 per cent in comparison to 2.6 per cent in the first and core inflation, which excludes prices of food, energy, health care and education services, will edge up to 2 per cent in 2019.
Meanwhile, Standard Chartered’s economists expect unchanged policy rates in 2019 and mild appreciation of the Vietnamese dong (VND). They anticipate that VND should remain supported near-term by a stable current account surplus and strong FDI inflows and forecast USD/VND at 23,100 at end-2019 and 23,000 in mid-2020.