HSBC sees challenges to Vietnam economy in H2

HSBC expects Vietnam’s economy to face challenges related to foreign exchange and interest rates in the second half of this year.

Ngo Dang Khoa, head of global markets at HSBC Vietnam, said recent outbreaks of Covid-19 have sparked worries about production being interrupted for a long time, which would affect the country’s recovery.

“With many industrial parks being closed down and social distancing prolonging, growth momentum in the third quarter, in particular, will surely face many challenges.”

Social distancing to prevent the disease from spreading has affected consumer outlook and the recovery of services and tourism, while the new coronavirus mutants and slow vaccination would delay the reopening of borders to foreign investors and tourists, he said.

“It is necessary to adopt timely fiscal and monetary policies to safeguard the economy.”

It would be difficult to maintain a stable dong-U.S. dollar exchange rate in the second half unlike in the first mainly because of Vietnam’s trade deficit, inflation worries and the possible rise in U.S. interest rates, he said.

He predicted the exchange rate to be VND23,100 to the dollar by year-end.

Asian countries including Vietnam have yet to see inflationary pressure, but if prices continue to increase, it might have to increase interest rates, he said. Vietnam should not increase interest rates too early or too quickly since its economy has been severely affected by the pandemic, he said.

HSBC recently revised upward its forecast for Vietnam’s economic growth next year to 6.8 percent from the earlier 6.5 percent but lowered it to 6.1 percent from 6.6 percent for this year.