VinaCapital lowers Vietnam’s estimated GDP rate to 6.5% this year
VinaCapital, one of Vietnam’s most experienced asset management companies, has forecast that the country’s GDP growth rate this year is likely to expand by 6.5%, or 1% lower than its previous forecast.
Michael Kokalan, chief economist of VinaCapital, stated in a recently-issued report that the ongoing armed conflict between Russia and Ukraine has created shock waves in international financial markets, putting pressure on commodity prices. However, the conflict has had a negligible impact on the Vietnamese economy.
In his opinion, direct economic relations between Vietnam and Russia remain relatively small, with two-way trade between both countries reaching approximately US$3.2 billion last year, accounting for under 1% of total Vietnamese import and export turnover. Less than 4% of Russian tourists came to Vietnam during the pre-COVID-19 period.
Though Vietnam produces significant amounts of oil, natural gas, and coal, it remains a net importer. Given high energy prices, people’s spending will also shift from consumer goods to petroleum, a move that will consequently slow down the country’s GDP growth this year, emphasised the chief economist.
The most significant immediate risk is, according to the economist, that rising oil and commodity prices could increase Vietnamese inflation by 1 – 2%.
The expert forecast that petrol prices could increase by 30% in Vietnam over the coming months, a factor that could cause inflation to rise by 1.5%.
Petrol prices account for 3.6% of Vietnamese consumer price index (CPI) basket, with rising petrol prices indirectly impacting the national economy, thereby pushing up inflation, Kokalan explained.
In addition, he said there could be a sudden increase in the value of the US dollar that would cause the Vietnamese currency (VND) to depreciate by 1 – 2% against US$.
Furthermore, concerns regarding the expulsion of Russia from the SWIFT system have severely hampered the liquidity of US$ in foreign markets, causing it to appreciate in value, he analysed.