World instability increases, VNDirect lowers Vietnam’s 2022 GDP forecast

The waves outside are rising

The macro update report of VNDirect Securities (VND) said that the Vietnamese economy continued to recover in the first quarter of 2022. Accordingly, Vietnam’s economy overcame the negative impact of the epidemic and escalated commodity prices to record GDP growth of 5% over the same period in the first quarter of 2022.

Among the three pillars of the economy, the industry and construction sectors were strongly affected by the high cost of input materials and supply chain disruptions, thereby recording a growth of 6.4% over the same period. period in the first quarter of 2022.

In addition, labor shortages due to the outbreak of COVID-19 infections and supply chain disruptions are the main reasons for the slowdown in processing and manufacturing growth in the first quarter of 2022.Read More Moreover, the growth rate of the construction industry in the first quarter of 2022 decreased to 2.6% year-on-year, from 6.5% growth in the first quarter of 2021.

World instability increases, VNDirect lowers Vietnam's 2022 GDP forecast - Photo 1.

Vietnam’s GDP grew by 5.0% year-on-year in the first quarter of 2022. Source: VND.

In the first quarter of 2022, the profit margin of construction companies shrank due to the increase in the price of construction materials, which slowed down the progress of some projects. On the positive side, the mining sub-sector increased by 1.8% y/y thanks to higher prices of basic materials, especially coal and crude oil. According to VND, this is the first quarter to record a positive growth when compared to the same period since the fourth quarter of 2019.

VNDirect lowers GDP growth forecast in 2022 to 7.1%

Thereby, the report said that the domestic economic recovery momentum is being supported, because Vietnam is gradually shifting its status to living with COVID-19 and considers COVID-19 as an endemic disease. However, the economy faces increasing external uncertainties.

First, The slowdown in world economic growth due to the Russia-Ukraine crisis may narrow demand for Vietnamese exports.

Specifically, many major research organizations around the world have lowered their global economic growth forecasts in 2022 to reflect the negative effects of the ongoing Russia-Ukraine conflict. Specifically, the Economist Intelligence (EIU) has reduced its growth forecast for the euro area in 2022 to 2%, from the previous forecast of 3.9%.

The weakening growth outlook in Europe has also led to a slowdown in global growth. Accordingly, the Organization for Economic Development (OECD) said that the conflict in Ukraine could reduce global economic growth by more than one percentage point in the first year.

In the context that consumers in Vietnam’s main export markets such as the US, EU and Japan tighten their spending, VND assesses that the demand for Vietnamese exports in the second half of 2022 is likely to decrease. , especially durable goods and consumables.

Second, Growth momentum in the industrial and construction sectors slowed down due to rising prices of construction materials and logistics costs. According to IHS Markit, an organization that provides monthly Vietnam Purchasing Managers’ Index (PMI), has shown that in March, input prices of the manufacturing sector in Vietnam increased at the fastest rate. within the past 11 years.

This is the main reason why Vietnam’s PMI last month dropped to 51.7 points from 54.3 points in the previous month. Therefore, experts of VND are concerned that the growth rate of the manufacturing sector may slow down in the second quarter of 2022 due to the impact of the Russia-Ukraine conflict.

World instability increases, VNDirect lowers Vietnam's 2022 GDP forecast - Photo 2.

Key macro projections for 2022. Source: VND.

Tuesday, The Fed narrowed its balance sheet and raised interest rates faster than expected, tightening global financial conditions, narrowing the room for Vietnam to maintain an easy monetary policy to support economic recovery. economic recovery.

Final, China’s maintenance of the zero-Covid policy may have a negative impact on Vietnam’s import and export activities. China is Vietnam’s largest trading partner with a total two-way trade value of 165.9 billion USD in 2021.

In which, Vietnam’s exports to China reached 56 billion USD (accounting for 14.9% of Vietnam’s total export turnover) and imports from China reached 109.9 billion USD (accounting for 33.1% of total export turnover). imported from Vietnam). Therefore, China’s assessment report, disease developments and zero-COVID policy will likely have a strong impact on Vietnam’s import and export activities in the coming quarters.

In the context of Vietnam’s economy facing many challenges from the Russia-Ukraine conflict, escalating commodity prices and the Fed tightening monetary policy, VNDirect experts decided to downgraded GDP growth forecast for 2022 to 7.1% y/y (previous forecast was 7.5%). However, experts are optimistic that Vietnam’s economy will still be among the fastest growing countries in the Asia-Pacific region in 2022.

Particularly for the second quarter of 2022, the report said, Vietnam’s GDP grew by 5.6% over the same period, improving from 5.0% in the first quarter of 2022 and the average CPI in the second quarter of 2022 is estimated to increase by 3 .1% over the same period due to high commodity prices.

According to Giang Anh

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