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Standard Chartered Bank revises Vietnam growth forecast down to 3 pct

By Quy Nguyen   July 23, 2020 | 07:08 pm PT
Standard Chartered Bank revises Vietnam growth forecast down to 3 pct
Workers produce garment products at a factory in the southern province of Long An. Photo by VnExpress/Quynh Tran.
The Standard Chartered Bank has revised Vietnam’s 2020 growth forecast from 3.3 to 3 percent, citing weakening external demand.

In economic outlook report titled "The Afterstock" released Thursday, the bank said manufacturing and services sectors are likely to recover and be main growth drivers in the second half of the year.

However, the manufacturing sector’s growth is estimated at roughly 1.5 percent in 2020, with its contribution to growth declining by 1.8 percentage points.

A slowdown in tourism and related activities is likely to weigh on consumption, which is projected to pick up in H2 following the reopening of the economy but to remain below 2019 levels, it added.

Standard Chartered’s economists anticipate Vietnam’s trade to pick up in H2 as global demand recovers, but a recovery to pre-Covid-19 levels is unlikely, they say.

Demand from China should support a pickup in both exports and imports near-term, the report says, adding that subdued global demand will impact on trade growth. The bank expects trade balance to remain in surplus this year as lower imports offset soft exports.

"Vietnam’s dependence on the global economy is the second highest in ASEAN after Singapore, its trade-to-GDP ratio of 198 percent is among Asia’s highest, driven by electronics exports," said Chidu Narayanan, the bank’s economist for Asia.

Vietnam’s GDP growth fell to a decade-low of 1.8 percent in the first half of the year. An estimated 7.8 million workers have lost their jobs or had their working hours reduced, with the number of businesses temporarily suspending operations rising 38 percent year-on-year to 29,200 in the period.

U.K.-based Oxford Economics, a firm that specializes in global forecasting and quantitative analysis, had earlier forecast Vietnam’s GDP growth rate for this year at 2.3 percent, while U.S.-based market research firm Fitch Solutions had it at 3 percent. The World Bank’s estimate has been the lowest for far at 1.5 percent.

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