Maybank Kim Eng (MBKE)’s two Southeast Asia and Vietnam analysts, Linda Liu and Chua Hak Bin, released a report on Vietnam in 2020. Accordingly, analysts forecasted that Vietnam’s Gross Domestic Product (GDP) would decline slightly from seven percent in 2019 to about 6.6 percent in 2020 and 2021.
Vietnam aimed to achieve more sustainable growth around its long-term potential to focus on addressing infrastructure congestion and risks of rapid growth. Therefore, Vietnam’s GDP growth in the next two years would decrease slightly to 6.6%.
The Foreign Direct Investment (FDI) remained to be a major driver of growth structure as the amount of FDI disbursed in the manufacture and export sectors increased. The disbursement rate of FDI in September and October increased by 10.4 percent compared to 6.3 percent in the first eight months of 2019, showing that these investments were shifting from registration to actual implementation.
Regarding monetary policy, in 2020, MBKE expected SBV to loosen monetary policy.
SBV was expected to cut the refinancing rate by 25 points to 5.75 percent (from six percent) by 2020. While current policy rates seemed to be in line with the economic growth and inflation control, a further 25 percentage point reduction would continue to support the government’s commitments to reduce lending rates, especially in priority areas, according to Linda Liu and Chua Hak Bin.
Recent moves by SBV, such as the requirement to lower the ceiling interest rates on deposits and lending rates in several priority areas (agriculture, export-related industries, small and medium-sized enterprises, and high technology) proved this expectation.
At the last National Assembly session (the 8th session of National Assembly XIV), prime minister Nguyen Xuan Phuc said the government’s goal was to reduce lending rates by 50 percentage points (0.5%), most were the priority sector loans in 2020.
SBV continued to tightly control the flow of credit into the ‘hot’ areas (such as real estate) through macro measures (such as increasing the risk coefficient) targeting assets and consumer loans which were not guaranteed. The target credit growth could be maintained at 14 percent in 2020.
Regarding inflation, MBKE forecasted it to increase slightly to 3.5 percent in 2020 and 3.4 percent in 2021 (compared to 2.6 percent this year).
As for the VND/USD exchange rate, MBKE forecast it to decrease from 23,200 dong in 2019 to 23,000 dong in 2020.
Regarding fiscal, in the coming year, although public spending would be higher, thanks to tax revenues, the deficit would decrease. The ratio of public debt to GDP dropped from a peak of 63.7 percent in 2016 to 56.1 percent in 2019. The Ministry of Finance forecasted that this ratio would continue to decline in the following years, 54.3 percent in 2020 and 52,7 percent in 2022, much lower than the prescribed public debt ceiling (65 percent of GDP).
