HSBC forecasts Vietnam’s GDP growth at 7pct in 2011

HSBC said in its latest report that Vietnam is implementing steps to restore the balance to the economy and has adjusted its GDP growth forecast for Vietnam from 7.5 percent down to 7 percent.

The adjustment of the forecast on GDP growth came from the current priorities of the government in controlling inflation, said HSBC.

HSBC pointed out some challenges for Vietnamʹs economy as high inflation, widening trade deficits and currency devaluation pressure, while the foreign investors, who play an important role in the development of the economy, stand out in the context of weakening confidence.

Since January, a series of drastic measures have been introduced, and the economy is expected to step into a more stable period in 2011. HSBC also said that the restrictions in public spending and credit growth will help offset the impact of raising energy prices.

HSBC forecasts the CPI growth rate will return to a one‐digit level from the current 13.2 percent by the end of this year, and reach the average level of about 9.9 percent in 2011. In addition, these efforts are also expected to help restore confidence of investors, reflecting the actual FDI figures.

However, the government’s measures to tighten fiscal and monetary policies now will affect growth. Therefore, HSBC has downgrade its GDP growth forecast for Vietnam in 2011 from 7.5 percent to 7 percent. The decline in domestic demand is expected to partly offset by an increase in investment activity (especially FDI) when the confidence of investors is restored.

HSBC also has offered the optimism for the medium‐term prospects of the economy to improve the balance of the economy. With the current efforts of the government of Vietnam, HSBC said that instead of using interest rates causing psychological impact rather than the practical effect as the base rate, the government of Vietnam will focus on tools with major influence such as interest rates of the open‐market operations.

HSBC forecasted that the State Bank of Vietnam will raise OMO interest rates to 14 percent by the second quarter of this year.

Tags: Vietnam economic, Vietnam economy, Vietnam GDP, Vietnam GDP 2011

Posted by VBN on Mar 7 2011. Filed under Economy News, GDP. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry