Standard Chartered raises Viet Nam's 2022 GDP growth forecast to 7.5 percent

The international lender also raised Viet Nam's 2023 GDP forecast to 7.2 percent from its previous projection of 7.0 percent

In addition, Standard Chartered lowered its inflation forecast for this year to 3.3 percent from 4.2 percent and increase inflation in Q4 to 5 percent from 3.3 percent in Q3.

Inflation has largely been under control; price pressures may increase in the rest of 2022 and 2023. Besides supply-side factors, demand-side factors might kick in more strongly.

Tim Leelahaphan, Economist for Thailand and Viet Nam, Standard Chartered Bank, forecasted that inflation, a threat to Viet Nam's continued recovery, would gradually increase next year and reach 6 percent by the end of the year, and the average inflation in 2023 would climb to 5.5 percent.

The Standard Chartered economist expected the State Bank of Viet Nam would continue tightening monetary policy and forecasted a 50 basic point (bps) hike in the refinancing rate each in Q4-2022 and Q1-2023, taking the rate to 6 percent, following a 100bps hike to 5 percent on 22 September.

"We think the State Bank of Viet Nam would continue to be vigilant against the risks of inflation and financial instability, in addition to supporting businesses to recover from the Covid-19 pandemic", said Tim Leelahaphan.

According to the UK-based lender, the VND is likely to face several headwinds in the short term – Fed's hawkish approach, strong USD, higher commodity prices and slowing external demand. Despite recent depreciation, the VND significantly outperformed its peers across emerging markets in Asia.

Standard Chartered Bank expected VND depreciation to slow in the coming months. USD-VND's correlation with USD-CNY remains extremely strong. As such, a peak in USD-CNY will likely coincide with a peak in USD-VND.

The bank predicted USD-VND at 24,200 by end-2022, at 24,000 for end-Q1-2023 and then declining towards 23,400 by end-2023./.