Another Think Tank Cuts Vietnam’s GDP Growth Forecast to 6.1%

The U.S.’s plan to impose the border adjust tax will weigh on Vietnam’s exports, according to MarketIntello.

MarketIntello, a Hanoi-based independent market research company, has revised down its 2017 GDP growth forecast for Vietnam by 0.2 percentage point to 6.1%, citing a slowdown of the mining sector and potential impact of global turbulence on the country’s exports.

The country’s economy expanded 5.1% in the first quarter (Q1) this year, the lowest in the latest three years, due to a wider trade deficit, slower investment, and weaker retail sales, according to a MarketIntello report.

The anemic manufacturing sector will pose challenges to the government’s 6.7% GDP growth target this year, said Dinh Tuan Minh, head of MarketIntello.

Global developments are expected to exert negative impacts on Vietnam’s external position and foreign investment, says the report. 

Foreign investment inflows into Vietnam will likely dwindle as U.S. and EU economies bounced back. In addition, the U.S. border tax, if effective, will hurt Vietnam’s exports as well as add pressure to the dong devaluation.

Against this backdrop, “the Vietnamese economy needs measures aimed to improve the business environment and facilitate private investment to thrive,” the authors suggest.

Inflation in Vietnam is forecast to accelerate to 4.3% this year. The possibility of electricity prices being hiked and the monetary policy being loosened in the second half of the year will send inflation surpassing the 4% target.

The think tank forecasts the USD/VND rate to weaken by 1.5-2% this year as the Fed is poised to raise interest rates twice toward the year-end and the trade deficit persists, which stimulates demand for the greenback.

The Vietnam Center for Economic and Policy Research (VEPR) last week also cut its growth forecast for Vietnam by 0.3 percentage point to 6.1% this year.

Tuan Minh / BizLIVE