HSBC lowers Vietnam’s 2022 GDP rate to 6.2%

Vietnam's post-pandemic economic recovery is on the right track. (Illustrative image)

Despite this fall, the bank said Vietnam remains likely to be one of the countries recording the highest growth rate throughout the region.

HSBC also raised the country’s inflation for this year to 3.7%, a rate which still falls below the 4% target previously set by the State Bank of Vietnam.

In the year ahead, HSBC noted that Vietnam has enjoyed a good start with GDP in the first quarter growing steadily at 5% year on year, a figure which is higher than the bank’s 4.7% projection. This means the country’s economic recovery is on track and is gathering full steam.

The bank attributed strong Vietnamese recovery momentum in the first quarter to internal and external growth pillars. It’s noteworthy that the government’s decision to reopen its borders to international tourism is set to boost tourism revenue.

Despite these positives, the bank lowered Vietnams 2022 GDP growth rate by 0.3% compared to its previous projection of 6.5% as there remain challenges ahead, especially in the context of a global fuel shortage.

The primary factors hindering growth, according to HSBC, are rising oil prices that could adversely impact Vietnamese trade balance. Rising petrol prices would also fuel living costs and slow down personal consumption recovery, especially when the local labour market has begun to show signs of gathering momentum.

Rising commodity prices would also drive up yearly inflation to 3.7%, although this is still below the set target of 4%. The bank said that Vietnamese inflation has basically been kept in check compared to other emerging markets, particularly given increasing food prices and price pressure due to demand basically being under brought control.

However, HSBC analysts suggested that the Government tighten its monetary policy to ease pressure on inflation.