HSBC cuts growth forecast for Vietnam

Vietnam was going through its fourth and worst Covid-19 outbreak since the start of the pandemic, the bank said in a report.

The services sector had been bearing its economic brunt, contributing only 20 percent to growth in the second quarter compared to 45 percent before the pandemic.

Domestic demand had become bumpy, with retail sales in the second quarter being the lowest since the national lockdown in the second quarter last year.

Unemployment ticked up from 2.4 percent in the first quarter of this year to 2.6 percent in the second, with the total number of jobs reducing by 65,000.

"Emerging markets like Vietnam will likely wait for a long time to see a meaningful pick-up in domestic consumption until the job market achieves a fuller and sustained recovery."

With nearly 20,000 cases confirmed in the latest outbreak, the drag on the economy would persist at least through the third quarter.

But resilience in manufacturing and exports had supported growth. Exports rose 33 percent year-on-year in the second quarter as Vietnam still reaped the benefits of elevated demand for pandemic-related products, including electronics and machinery.

"Despite immediate Covid-19 challenges, we remain optimistic about Vietnam’s economic recovery," the report said.

Vietnam had made progress in accelerating vaccine procurement, and would receive 62.4 million doses to immunize 30 percent of its population by the end of next year, it said.

Inflation was expected to average 2.8 percent this year, providing flexibility for the central bank to remain on hold in 2021, it added.

GDP grew by 5.64 percent in the first half this year, triple the rate in the comparable period last year.