Standard Chartered expects Vietnam to be ASEAN outperformer

Tuesday, 2019-08-13 21:35:06
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Rice loaded for exports. (Photo: VNA)
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NDO/VNA - Standard Chartered forecasts Vietnam to remain the fastest-growing ASEAN economy in the near term, with 2019 growth projected at 6.9%.

The FDI-driven manufacturing sector, which is poised for a fourth consecutive year of double-digit growth, will continue to be 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”.

“Vietnam’s growth prospect remains strong, with macro-economic conditions staying stable in the first half of the year which is likely to continue towards year-end. We expect growth to accelerate mildly in the second half from 6.7% in the first half,” said Chidu Narayanan, Economist, Asia, Standard Chartered Bank.

According to the latest macro-economic research report, FDI inflows will stay robust this year, particularly to the manufacturing sector, totalling US$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% 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 forecasts that inflation will pick up modestly in the last six months of the year, averaging 2.8% in comparison to 2.6% in the first half of the year and core inflation, which excludes prices of food, energy, health care and education services, will edge up to 2% in 2019.

Standard Chartered’s economists expect unchanged policy rates in 2019 and mild appreciation of the 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.