HSBC lowers 2017 economic growth forecast for Vietnam

By Minh Nga   July 20, 2017 | 11:07 am GMT+7
HSBC lowers 2017 economic growth forecast for Vietnam
Workers at an auto plant in Vietnam. Photo by VnExpress/PV

The expected growth rate is now far below the government’s target of 6.7 percent.

Vietnam’s economy is likely to grow by only 6 percent this year, HSBC said in a new report released on Wednesday, revising down its previous forecast of 6.4 percent.

The country’s GDP grew 6.2 percent in the second quarter driven by gains in both the industrial and service sectors.

This was higher than HSBC's forecast of 5.9 percent, but the bank has still reined in its 2017 growth forecast due to the country’s sluggish first quarter.

Growth in Q1 hit a three-year low of 5.2 percent, partly due to a slump in electronics exports. Samsung Electronics, which accounts for about 20 percent of the country’s shipments, ended production of its Galaxy Note 7 smartphone in October, significantly impacting Vietnam’s growth, said the bank.

However, in Q2 industrial production picked up, growing 9 percent.

HSBC said that tourism will act as the main driving force for economic expansion for the rest of the year.

According to Vietnam’s General Statistics Office (GSO), an estimated 6.2 million tourists visited the country in the first half of 2017, up 30.2 percent against the same period last year. In June alone, 950,000 tourists visited Vietnam, up 33.6 percent, driving growth in the accommodation and food services industries.

“We expect tourism to remain steady for the remainder of the year, especially as the government extends its visa-waivers to selected countries to June 2018, barring any natural disasters,” HSBC said in its report.

Vietnam has been working hard to realize its ambitious growth target of 6.7 percent for this year.

Earlier this month, the State Bank of Vietnam reduced its lending interest rate by 0.25 percent to 6.25 percent for the first time in three years to boost economic growth, as Vietnamese companies still rely heavily on bank loans.

In early June, the government put forward fresh plans to tap more oil and gas, despite warnings from lawmakers of becoming overreliant on the mining industry to fuel growth.

The Ministry of Industry and Trade will increase the amount of crude oil exploited this year by 8 percent to 13.28 million tons, and gas by 10.4 percent to 10.6 billion cubic meters. This will help add around 0.25 percent to economic growth.

In April, the Asian Development Bank raised its forecast for Vietnam's economic growth this year from 6.3 percent to 6.5 percent, while the World Bank reversed its prediction from 6.5 percent to 6.3 percent. The International Monetary Fund also recently lowered its forecast to 6.3 percent.

In an interview with Bloomberg in late May, Prime Minister Nguyen Xuan Phuc said he is confident that Vietnam will meet its economic growth target of 6.7 percent, despite weak expansion in the first quarter.