Vietnam’s economy is expected to expand 6.8% this year and 7.0% in 2019, Australia and New Zealand Banking Group (ANZ) has said in an update on Wednesday, unchanged from the bank’s projections in early June, despite a higher-than-expected growth rate in the first half this year.
“We forecast strong GDP growth this year and next, as Vietnam continues to attract FDI inflows and expand their manufacturing base,” said Khoon Goh, head of Asia Research at ANZ.
The bank pointed out that factors that contribute to Vietnam’s positive long-term outlook include favorable demographics, an educated workforce, ongoing economic reforms, and benefits from free trade agreements that include CPTPP and possibly RCEP and the Vietnam-EU FTA.
The bank also noted that in the near term, Vietnam will face a number of challenges including having to ensure that inflation remains contained, credit growth is not too strong above trend, and that the balance sheets of the financial sector are strengthened.
CPI has risen above the 4% target. Source: Haver, ANZ Research
When it comes to monetary policy, ANZ expects the Vietnamese central bank to keep the policy rate at 6.25% in 2018, but to raise it to 6.75% next year to keep inflation in check.
The USD/VND rate is forecast to reach 23,600 by end-2018 and 23,900 by end-2019, the bank said in the report.
In the June report, ANZ expected the USD/VND rate to end 2018 at 22,780, a 0.4% depreciation in the dong for the year.
The Vietnamese dong has weakened since mid-June. Source: Bloomberg, ANZ Research