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Economic update – Faster ascent in the 3Q22

Economics Note 14/09/2022    253


  • Following the easing inflation pressure, we downgrade Vietnam’s average CPI forecast for 2022F to 3.2% (+/- 0.2%) from 3.5%.
  • We expect 3Q22 GDP to hasten 13.1% yoy on low base last year.
  • We raise Vietnam’ GDP growth forecast for 2022F to 7.7% (+/- 0.3%) from previous 7.1%.

Both services and manufacturing saw strong improvement in Aug

According to General Statistics Office (GSO), gross retail sales of consumer goods and services in Aug climbed to VND481,225bn (+0.6% mom, +50.2% yoy). Meanwhile, Vietnam’s general IIP expanded 2.9% mom in Aug (+15.6% yoy). This is a strong improvement from the growth of 1.6% mom (+9.5% yoy) in Jul. Last but not least, export growth rebounded strongly in August after a weak July with export value reaching US$34.9bn in this month, up 14.1% over that in the previous month and up 27.8% over that in the same period last year.

Inflation pressure cooled down thanks to tax cuts on petroleum products

According to GSO, Vietnam’s headline inflation rose 2.9% yoy in Aug 2022 (lower than the level of 3.1% yoy in the previous month). On mom basis, Vietnam’s CPI stayed flat in Aug (vs. an increase of 0.4% in Jul), mainly supported by the decline of transportation price index (-5.5% mom in Aug). We lower our 2022F average CPI forecast for Vietnam to 3.2% (+/- 0.2%) from the previous forecast of 3.5% yoy to reflect the global commodity prices downturn and the Government’s effective inflation control.

SBV officially raised credit growth quotas for selected commercial banks

On Sep 7, the State Bank of Vietnam (SBV) has lifted credit growth quotas for 2022 to 15 commercial banks. We expect about VND279 trillion of loan will be added to the economy, equivalent about additional 2.7% credit growth. We believe SBV is prioritising inflation containment and macro stability. Thus we see limited chance for further credit growth limit increase this year.

We raise our 2022F GDP growth forecast to 7.7% (+/- 0.3%)

We raise GDP growth forecast for 3Q22F to 13.1% (+/- 0.6%) regarding: (1) the government-backed policy has fueled an impressive recovery in domestic consumption and tourism in recent months, (2) stronger-than-expected manufacturing activities as sustainable recovery in domestic demand spurred new orders. As a result, our 2022F GDP growth forecast is revised up to 7.7% (+/- 0.3%). Main risks to the economy growth still include (1) Fed’s tightening monetary policy, (2) emerging uncertainties of the Chinese economy, (3) strong dollar puts pressure on Vietnam’s exchange rate and (4) inflationary risks.

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