FDI into Vietnam rebound in May, 2022 GDP growth forecast at 6.5%: UOB

The GDP forecast assumes that GDP growth in the second quarter of the year will pick up its pace to reach 6 per cent on-year, growing further to 7.6 per cent ahead in the third quarter.

In its latest report, the bank notes the manufacturing sector continued to record strong growth at 9.24 per cent in the first five months of the year compared to 8.28 per cent recorded in the initial four months. This performance is also reflected in the purchasing managers’ index (PMI), which was in its eighth month of expansion in May, according to media reports from Vietnam.

UOB said the consumer side has witnessed several positives over recent months due to the lifting of domestic COVID-19 restrictions and the reopening of cross border travel, both of which have injected fresh life into the services sector after a period of stagnation.

However, UOB experts say several external risks look set to pose challenges to this outlook, including the Russia-Ukraine conflict and its impact on commodity prices. Other issues include inflation risks on domestic and external demand, global supply chain disruptions, macroeconomic factors and continued COVID-19 risks.

After reaching its lowest figure in February at 1.4 per cent on-year, UOB notes that inflation in Vietnam has been trending up, rising by 2.86 per cent in May. The elevated price of global energy and food as well as supply chain disruptions have contributed to the jump in Vietnamese inflation.

“With the Russia-Ukraine conflict stretching beyond 100 days and showing no signs of easing of tensions and sanctions, we expect Vietnam’s headline inflation rate at 3.7 per cent in 2022 and rising further to 5 per cent in 2023,” the bank projects.

Fibre2Fashion News Desk (DS)