Vietnam, with one of the most open economies in Asia as measured by external trade relative to GDP, is not immune to global macro headwinds — in particular, cost-push inflation, pressure on the terms of trade from higher oil prices and slower growth in the US and China. However, several structural and cyclical factors suggest Vietnam is relatively well placed to deliver robust growth with reasonable macro stability.
1H2022 HIGHLIGHT
- 1H2022 GDP growth hit 6.4% YoY, vs. government baseline target (5.1 – 5.5%)
- Strong rebound in GDP 2Q22 (7.7% vs 5.1% in 1Q22).
- Vietnamese manufacturing stands out as a diversification play for China
- Manufacturing resilient (2Q22: 11.6% vs 1Q22: 7.7%);
- Jan-June ’22 exports +17.5% YoY
- Monetary policy: No rate hike, weaker exchangerate (VND -2.5% YTD)
- FX reserves also utilized (YTD est. sales of $17 bnUSD)
- 1H22: Credit growth (17% YoY) vs M2 (9.5% YoY)
CATALYST 2H2022 OUTLOOK
Key forecast: 2H2022 GDP growth: 7.5% YoY, FY2022 GDP: 7.0% (IMF); Average 2022 CPI: 3.8% (World Bank); USD/VND: 23,600
- Pent-up demand in service sector to boost growth
- Manufacturing momentum remains resilient to year-end, though pace of export growth might slow down from 3Q2022
- Public investment gained pace, after the National Assembly greenlit the list of projects, and eased regulations.
CATALYST 2023 OUTLOOK
Key forecast: 2023 GDP growth: 6.7% (IMF and World Bank); Average 2023 CPI: 4% (World Bank);
- A larger part of the 2022-2023 stimulus package will be spent in 2023, which could mitigate the impact from recession risk in developed economies
- Resilience in disbursed FDI due to the diversification play from China.
- A more new normal in China (rather than China’s Zero Covid policy), could be a bonus for Vietnam (not just for supply chain resilience, but also for international tourist arrivals)
RISKS
- Inflation risk in late 2022 and 1H23
- Vietnam trade openness vulnerable to global recession risk
- Corporate bond market: A tightening approach to Decree 153 will likely create crackdowns in the market
- Declining liquidity in property market
Source: Lao Trinh
