Log in
Business

HSBC revises up Vietnam’s GDP growth forecast to 6.9% in 2022

Vietnam saw an 11-year-high growth rate of 7.7% y-o-y in Q2/2022, largely reaping the benefits of re-opening tailwinds.

HSBC has revised up Vietnam’s GDP growth forecast to 6.9% from the previous 6.6%, making it among the top performers in the region.

 

 Car production at Vinfast's manufacturing plant. Photo: Pham Hung/ The Hanoi Times

After two-quarters of sustainable re-openings, Vietnam’s recovery continues to be strong. The country’s second-quarter GDP growth hit 7.7% year-on-year, beating market expectations.

“This represents the highest growth Vietnam has seen in a quarterly GDP print since 2011, thanks to strong broad-based recovery across sectors,” noted HSBC in its latest report.

Thanks to removals of major local curbs and border restrictions in mid-March, travel-related sectors, particularly transportation and accommodation, have started to see meaningful revivals, stated HSBC.

Meanwhile, retail sales overshot 17% year-on-year in the second quarter, signaling a return of rebounding household consumption. Indeed, part of the success was attributed to a gradual recovery in the local labor market. The unemployment rate dropped to 2.3% in the second quảter, while employment continued to expand close to its pre-pandemic levels.

Tourism is also making headway as the summer season approaches. In the April-June period, Vietnam welcomed 500,000 visitors, almost five times more than those in the previous one, taking total tourists to 600,000 in the first half of the year. Before the pandemic, 80% of tourists came from Asia, topped by those from mainland China (32%) and South Korea (24%). Now, only 65% of tourists are from the region. European (16%) and the US (11%) tourists have accounted for a large chunk of tourists post-pandemic, right after South Korea (18%). The Vietnam National Administration of Tourism (VNAT) set an ambitious target of five million foreign tourists in 2022, a little shy of 30% of 2019’s level.

Aside from recovering domestic demand, Vietnam’s manufacturing has proved to be in a league of its own. All signs are pointing in the same direction of firm manufacturing growth. Albeit partly due to favorable base effects, industrial production (IP) growth accelerated to over 25% y-o-y in the second quarter.

Export growth hit an impressive pace of over 20% year-on-year in the period, a third of which came from firm computer and smartphone shipments. However, it is more than that: textiles and footwear, as well as machinery, all registered decent growth, indicating that Vietnam’s external engine is roaring again, stated HSBC.

Another bright spot came from the consistent FDI inflows, which reflect investors’ unwavering interests and confidence in Vietnam’s sound fundamentals.

High energy prices pose risks to growth

According to HSBC, even though price pressures are not as acute as in regional peers, for now, inflation momentum is rising rapidly. Headline inflation rose 0.7% month-on-month, translating into 3.4% year-on-year. Similar to previous months, high transport inflation remains the primary driver, rising 3.6% month-on-month. Indeed, domestic petrol prices continue to be adjusted upwards, jumping to record high levels.

In response, the government sought to cut taxes on petrol to alleviate some of the pressure, as taxes and fees account for around 35% of gasoline prices. Since 1 April, the environment tax was cut to VND2,000 for gasoline and VND700-1,000 for other fuels, which is expected to run through 2022. In early June, the Ministry of Finance (MoF) proposed to further cut it to VND500- 1,000, which is expected to take effect in early August. But this may not be the end. The MoF also signaled that it is considering reducing special consumption tax (8-10%), and VAT (10%), but this requires approval from the National Assembly, whose upcoming session is scheduled for October.

While high energy prices are largely expected, it was not the same for food inflation with an increase of 0.8% month-on-month. It largely reflects the strong pass-through of elevated energy costs on food inflation, as there is a broad-based price increase across items including meat, egg, and vegetables, based on data from the General Statistics Office (GSO).

Moreover, there are signs that inflation has started to broaden out. Core inflation recovered to 2.0% year-on-year for the first time in almost two years, as domestic demand continues to gain traction. Given elevated global oil prices, HSBC expected upward pressures on inflation to persist.

While the report forecast 2022 inflation to average 3.5% – still below the State Bank of Vietnam’s (SBV) 4% inflation ceiling – price pressures will become stronger in the second half, it noted.

Based on its inflation forecasts, inflation will likely overshoot 4% from the fourth quarter of 2022 to the second quarter of 2023, increasingly calling for the SBV to start its monetary normalization, HSBC suggested.

Hanoi's GRDP in the first six months of 2022 is estimated at 7.79% year on year, a 1.29 fold increase against the same period of last year, while the city’s state budget collection increased by 20.2% year on year and reached 56.8% of the year’s estimate.

Reactions:
Share:
Trending
Most Viewed
Related news
Vietnam’s AI economy to reach US$130 billion by 2040 

Vietnam’s AI economy to reach US$130 billion by 2040 

The report identified AI as a key driver of Vietnam’s future economic growth.

Hanoi breaks ground on $7.3 million craft village industrial cluster

Hanoi breaks ground on $7.3 million craft village industrial cluster

The new craft village industrial cluster will help ease the shortage of production space for local households and businesses.

Prime Minister calls for Swedish investment in Vietnam’s tech infrastructure

Prime Minister calls for Swedish investment in Vietnam’s tech infrastructure

Vietnam places a high priority on partnering with trusted, long-time friends like Sweden in advancing high-tech sectors, as it seeks to attract quality investment and foster sustainable development.

E-commerce platforms to pay taxes on behalf of sellers 

E-commerce platforms to pay taxes on behalf of sellers 

Under the new rules, a portion of each transaction will be deducted to pay taxes once payment is completed.

French leading corporations propose nuclear power, high-speed rail cooperation in Vietnam

French leading corporations propose nuclear power, high-speed rail cooperation in Vietnam

Top French firms like EDF, Alstom, and Thales are looking to partner with Vietnam on nuclear power, high-speed rail, and aerospace projects.

Vietnam's firm launches the Philippines' first electric taxi service

Vietnam's firm launches the Philippines' first electric taxi service

The Philippines is GSM’s fourth market after Vietnam, Laos, and Indonesia, signaling a significant step in its Go Green Global strategy for expanding electric vehicles internationally.

Qualcomm's Hanoi-based AI R&D center is the 3rd largest globally 

Qualcomm's Hanoi-based AI R&D center is the 3rd largest globally 

The establishment of Qualcomm's new Artificial Intelligence Research and Development Center reflects Vietnam’s efforts to attract global tech investment and talent, aligning with its ambition to become a regional AI powerhouse.

US-ASEAN Business Council supports balanced Vietnam-US trade agreement

US-ASEAN Business Council supports balanced Vietnam-US trade agreement

The US's long-term cooperation with Vietnam would yield strategic benefits and help improve a fair and balanced trade.