Standard Chartered forecasts Q2 GDP to moderate amid higher inflation

In its most recent macro-economic updates about Vietnam, Standard Chartered Bank forecasts Vietnam’s Q2 GDP growth to moderate to a still-strong 5.3% year-on-year (from 5.7% in Q1).

According to Standard Chartered’s economists, the bank expects retail sales growth to ease to 8.2% year-on-year in June (from 9.5% in May), export growth to ease to 14.2% year-on-year in June (15.8% year-on-year), and electronics exports to continue their year-to-date improvement.

Imports and industrial production are likely to grow 26.0% year-on-year (29.9%) and 5.2% in June, respectively. Inflation may rise to 4.5% year-on-year in June (from 4.4% in May), marking a third straight month above 4%. Education, housing and construction materials, health care and food have driven inflation recently. This trend may continue in the coming months.

Tim Leelahaphan, Economist for Thailand and Vietnam, Standard Chartered Bank, said: “Despite the likely Q2 slowdown, we think Vietnam’s recovery remains intact. However, economic challenges could persist in Q3 amid rising price pressures, FX weakness and soft global demand.”

The bank expects the State Bank of Vietnam (SBV) to hike the refinancing rate by 50bps in Q4 in response to rising inflation. FX weakness supports the bank’s call for a hike in Q4, or possibly earlier./.