Vietnam’s Q2 GDP growth to moderate amid higher inflation: Standard Chartered

Standard Chartered economists noted that retail sales and export growth in June are expected to ease to 8.2% and 14.2% compared to 9.5% and 15.8% in May, respectively, while electronics exports are likely to continue their year-to-date improvement.

Meanwhile, imports and industrial production in June are likely to grow by 26.0% and 5.2% compared to 29.9% and 8.9%, respectively, recorded in May.

Inflation in June may rise to 4.5% from 4.4% in May, thereby marking a third straight month when it has stayed above 4%. Education, housing and construction materials, health care, and food have all contributed to driving inflation recently, and this trend is likely to continue over the coming months.

“Despite the likely slowdown in the second quarter, we think Vietnam’s recovery remains intact. However, economic challenges could persist in the third quarter amid rising price pressures, foreign exchange weakness and soft global demand,” said Tim Leelahaphan, economist for Thailand and Vietnam of Standard Chartered Bank.

The bank anticipates that the State Bank of Vietnam (SBV) will move to hike the refinancing rate by 50 basic points ahead in the fourth quarter of the year in response to rising inflation. Foreign exchange weakness supports the financial institution’s call for a hike in the fourth quarter of the year, or possibly earlier. According to experts, the US Federal of Reserve moves will be key to the SBV’s policy decisions.