The forecasts were made in the report titled Still Battling Headwinds and Viet Nam-focused macroeconomic research report themed Viet Nam – Moving back to High Growth.

Economist for Thailand and Viet Nam at Standard Chartered Tim Leelahaphan stated the economy should continue to bounce back in 2022 as the pandemic improves. Income growth has outpaced spending growth in recent years; this provides a decent savings buffer against the pandemic.

According to Standard Chartered’s economists, exports should be supported in 2022 by a continued improvement in the global trade environment, although import growth is likely to remain high.

Inflation may become more of a concern for Viet Nam in 2022. Supply-side factors – including higher commodity prices, exacerbated by the pandemic – are likely to be the key driver near-term; and demand pressures will come into play as the economy develops further. 

A prolonged virus outbreak could lead to supply-driven inflation risks. In the next two years, inflation forecasts for Viet Nam are 4.2 per cent and 5.5 per cent respectively.

According to the Standard Chartered Bank, the State Bank of Viet Nam is expected to keep its policy rate on hold at 4per cent in 2022 to support credit growth and manage inflation risks and normalize the policy in 2023, with a 50 basis points hike to 4.5 per cent in Q4/2023.      

Standard Chartered Bank maintains its medium-term constructive view on the VND amid expectations of a strong balance of payments. The rapid pace of appreciation since July reflects more flexible exchange rate management by the central bank.

The VND is among the best-performing emerging market currencies in 2021. However, the bank expects the pace of appreciation to slow down given that Viet Nam’s current account is now in deficit, and the USD-VND exchange is approaching the limits of the rate band.