Standard Chartered Bank raises GDP forecast

Standard Chartered Bank (SCB) on October 6 increased its forecast for Vietnam’s GDP growth rate for the whole year to 6.8 percent, higher than the Government’s set target of 6.7 percent.
Illustrative image (Source: VNA)
Illustrative image (Source: VNA)

This is the highest forecast in the past nine years. The bank also predicted growth rate of 6.8 percent for next year, increasing from its previous forecast of 6.4 percent for 2017 and 6.6 percent for 2018, driven by faster electronics manufacturing growth in the second quarter of the year.

“This would make Vietnam the fastest growing ASEAN-6 economy in 2017, likely overtaking the Philippines,” Chidu Narayanan, economist at SCB, said.

Vietnam exceeded growth expectations in the third quarter, rising at its fastest quarterly year-on-year pace since the global financial crisis.

GDP growth rose to 6.4 percent year-on-year in the first three quarters of 2017, well above the prediction of 6.1 percent, driven by the manufacturing sector.

"We expect this growth momentum to continue, buoyed by the still-strong electronics sector," he added.

Electronics export growth is likely to remain robust in the near term, driving a trade surplus and supporting overall growth.

FDI inflow is likely to remain robust in the medium term, primarily due to the electronics-manufacturing sector, resulting in strong electronics manufacturing growth over the next few quarters. Strong FDI inflow is likely to support capital goods imports, capping the trade surplus.

The bank expected inflation to edge down from the 3.4 percent year-on-year in September on a high base effect. It also raised its inflation forecast to 3.7 percent for 2017 and 3.8 percent for 2018 (from 3.6 percent and 3.7 percent year-on-year, respectively) on the back of higher-than-expected inflation this year and faster-than-expected GDP growth.

“Although we expect inflation to edge up to 3.8 percent in 2018, it is likely to remain manageable, allowing the central bank to maintain its policy rate through 2018,” he said. 

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