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Economic update – Focus on macroeconomic stability

Economics Note 12/08/2022    295


  • Vietnam’s CPI decelerate to 3.1% yoy in July 2022 (vs. 3.4% in the previous month), thanks to a decline of domestic petrol price.
  • Both manufacturing and export delivered moderate growth in July.
  • We maintain our 2022F GDP growth forecast at 7.1% yoy (+/- 0.3%).

Service sector pick up to offset the moderation in manufacturing

According to General Statistics Office (GSO), gross retail sales of consumer goods and services in July climbed to VND485,984bn, up 2.4% over that in the previous month and up 42.6% over that in the same period last year. Meanwhile, lower external demand has been decelerated industrial production and export growth. Specifically, Vietnam’s PMI fell to 51.2 pts in July 2022 from a high level of 54.0 pts in the previous month while export value dropped 7.7% mom (+8.9% yoy) to about US$30.3bn in July 2022.

Vietnam’s CPI decelerated to 3.1% yoy in July
The domestic petrol price has been adjusted down 4 times in the past month, which is the main factor to help ease inflation. Per GSO data, Vietnam’s CPI rose 3.1% yoy in July 2022 (vs. 3.4% in the previous month). The Government has reduced the import tax on petrol from 20% to 10%, leading to further adjustment of domestic petrol prices in the near future. Overall, we maintain our forecast for Vietnam’s average CPI in 2022 at 3.5% yoy.

Monetary conditions remain favourable
The State Bank of Vietnam (SBV) set the loan growth of about 14% for 2022 (slightly higher than that of 13.8% yoy last year). We expect the SBV to raise the cap of credit growth for some commercial banks from the end of 3Q22F. We see increasing probability that commodity prices downturn and containable inflation provide the headroom for SBV to stay on extended pause of policy rates hike within this year.

More headroom for a growth-supportive fiscal policy
Higher state budget revenue (+18.1% yoy) and low budget expenditure contribute for a growth-supportive fiscal policy. Specifically, the Government has accelerated disbursement of economic stimulus package, including 2% VAT reduction, additional interest rate compensation package worth VND40,000bn, infrastructure development package worth VND113,050bn. In addition, the Government decided to reduce environmental protection tax and import tax on petroleum products in order to control inflation and stabilize the macroeconomic. Overall, we keep our 2022F GDP growth forecast at 7.1% yoy (+/- 0.3%).

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