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SCB forecasts growth of 6.6%

Released at: 12:00, 16/01/2017

SCB forecasts growth of 6.6%

Photo: Duc Anh/Illustration

Growth to get back on track following drought, according to Standard Chartered Global Research Briefing.

by Hong Nhung

Standard Chartered Bank (SCB) expects Vietnam’s GDP growth to stand at 6.6 per cent this year, after a drought-induced slowdown last year. Strong manufacturing growth and increased construction activity are likely to remain the key growth drivers, according to its latest report.

The forecast was announced at the Standard Chartered Global Research Briefing held recently in Ho Chi Minh City, which attracted senior representatives from more than 100 local and foreign enterprises.

“2017 is shaping up to be an exciting but volatile year,” said Mr. Marios Maratheftis, Chief Economist at SCB. “The potential reflation of the US economy is fueling optimism, but we think this is overdone, as tightening financial conditions may stunt growth before fiscal stimulus takes root. Tighter conditions are also likely to unleash further volatility, leading to re-pricing of risk in many emerging markets.”

The bank, however, remains upbeat about the outlook for Vietnam, which it believes is getting back on track after suffering from drought.

“Most macro-economic indicators in Vietnam have improved in recent months, and progress continues to be made in establishing appropriate macro-economic stability,” said Mr. Nirukt Sapru, CEO of SCB Vietnam. “We believe Vietnam will continue to be an attractive destination for investment.”

Mr. Chidu Narayanan, Economist, Asia, at SCB, expects FDI inflows in Vietnam to slow mildly in 2017 but still remain high, at close to $10 billion. Vietnam has benefited from its participation in regional trade pacts, which have helped to attract significant investment. “We see minimal negative impact on Vietnam from the TPP potentially not going through, as FDI in anticipation of the TPP had been front-loaded,” he said.

Economists and experts also commented that exports would increase only moderately, capped by still-slow demand from markets such as the US and the EU. On the other hand, inflation is likely to pick up, averaging 4.3 per cent. Policy rates seem to be unchanged and any devaluation of the Vietnam dong (VND) will be mild. Neutral short- and medium-term foreign exchange will burden the currency, the report said.

The event is part of the 2017 Standard Chartered Global Research Briefing series, which is held by SCB in major ASEAN cities to provide in-depth insight and analysis on global, regional and local socioeconomic trends that will have an impact on international business and trade in the year ahead.

The annual event saw the release of the Global Research report, entitled “Welcome to the Jungle”, which describes a 2017 with risks and possibilities multiplying and lurking like a scene in a tropical jungle. The report expects global GDP growth in 2017 to be similar to 2016, at 1.5 per cent, driven by emerging markets.

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