VinaCapital believes that continued FDI inflows into Vietnam, continued growth of the emerging middle class and domestic consumption will be the main factors driving economic growth.

The economy is returning to a long-term growth trajectory as the post-COVID-19 boom is over. Recent stock market movements have shown that the VN-Index's downtrend is coming to an end. VinaCapital expects Vietnam's economy and stock market to return to its true potential this year.

Michael Kokalari, Chief Economist of VinaCapital, said that Vietnam's GDP growth is likely to decelerate from 8% in 2022 to 6% in 2023, partly because the slowing global economy will affect the manufacturing and export sectors of Vietnam.

However, the reopening of China is likely to boost Vietnam's GDP growth by 2% through growth in foreign tourism. At the same time, growth is also supported by the Government's promotion of public investment when aiming to increase spending on infrastructure from about 4% of GDP in 2022 to 7% of GDP (equivalent to about USD 30 billion) in 2023.

In the long term, VinaCapital believes that FDI inflows will continue to flow into Vietnam; urbanization and demographics will help drive the continued growth of Vietnam's emerging middle class and domestic consumption... which will be the key drivers of economic growth.

Besides, VinaCapital expects Vietnam's macro-economy to remain stable this year. The value of VND has depreciated by 3% in 2022, while currencies in emerging markets have depreciated by 7%. In 2023, VinaCapital believes that the value of VND will increase by 2-3%.

In terms of inflation, Vietnam's CPI averages 3% in 2022, much lower than in the world's frontier/emerging markets. VinaCapital forecasts that this index of Vietnam will increase to 4% in 2023, largely due to the reopening of China which is likely to put pressure on food and energy prices in Vietnam.

For the stock market, Mr. Michael Kokalari said that the declining period of the VN-Index is ending and the market has a consensus on the expectation that the VN-Index will increase by more than 20% with a recovery of basically due to the improvement in both domestic and international factors that put pressure on the market last year.

In particular, global inflationary pressures are now easing. This means that the aggressive rate hikes by central banks that crippled developed and emerging equity markets last year may soon be over.

Kylie Nguyen