Standard Chartered Bank recently raised Vietnam's GDP growth forecast from 6.7% to 7.5% for 2022 and from 7% to 7.2% for 2023 after GDP growth in the third quarter reached 13.7%. GDP growth in the fourth quarter of this year is expected to reach 4%.

The bank forecasts that fourth-quarter inflation will increase to 5% and lower its full-year inflation forecast from 4.2% to 3.3%. Inflation is still under control, price pressure is expected to strengthen in the remaining months of 2022 and in 2023. In addition to supply-side factors, pressure from demand-side is also increasing.

“We forecast that inflation will gradually increase next year and reach 6% by the end of the year, the average inflation in 2023 will reach 5.5%. Inflation is a threat to Vietnam’s economic recovery,” said Tim Leelahaphan, economist in charge of Thailand and Vietnam, Standard Chartered Bank”.

Experts at Standard Chartered believe that the State Bank will continue to tighten monetary policy and raise the refinancing interest rate two more times, 50 basis points each time in the fourth quarter of 2022 and the first quarter of 2023, bringing the refinancing rate to 6%, after raising the interest rate by 100 basis points to 5% on September 22.

“The State Bank of Vietnam may raise interest rates more aggressively if inflation continues to increase and the dong (VND) depreciates more strongly than expected as the Fed continues to maintain its rather hawkish approach. We believe that the State Bank will continue to be vigilant against the risks of inflation and financial instability, in addition to supporting businesses to recover from the COVID-19 pandemic.” Mr. Tim Leelahaphan, economist in charge of Thailand and Vietnam, Standard Chartered Bank shared.

According to Standard Chartered Bank, VND could face many challenges in the short term – the US Federal Reserve (Fed) maintains a hawkish approach, strong USD, rising commodity prices and decrease in external demand. VND continues to be a strong currency compared to emerging countries in Asia despite the recent depreciation.

Standard Chartered forecasts that the rate of VND depreciation will slow down in the coming months. The USD/CNY and USD/VND exchange rates are still closely correlated. When the USD/CNY rate peaks, it may also be the time when the USD/VND rate peaks. The bank forecasts that the USD-VND exchange rate will reach VND 24,200 by the end of 2022 and VND 24,000 by the end of Q1 2023, then decrease to VND 23,400 by the end of 2023.

Kylie Nguyen