Standard Chartered Bank forecasts Vietnam’s economic growth will slow to 3.3 percent in 2020 due to a worsening of external conditions.
|A worker at Ben Thanh-Suoi Tien Metro Line 1 construction site in HCMC, April 2020. Photo by VnExpress/Nhu Quynh.
In an economic outlook report titled "Darkest Before The Dawn", the bank forecast manufacturing growth is likely to decline sharply on slowing global demand, with growth rate expected at close to 3 percent compared to around 11 percent in 2019.
The sector will contribute 1.6 percentage points less to this year’s growth than in 2019. The industrial sector accounts for around 19 percent of GDP, said the report.
The services sector, which contributes 40 percent, will slow down to 4 percent growth from 7.3 percent last year due to softer manufacturing growth, slowing domestic activity and social distancing measures.
Tourist arrivals are expected to decline by 60 percent and agriculture growth will remain at close to 4 percent.
Exports are expected to be slow due to lower global demand while imports will likely be moderate, ensuring a continued trade surplus.
Chidu Narayanan, Standard Chartered economist for Asia, said: "Vietnam is now more integrated with the global economy via its booming manufacturing sector; its trade-to-GDP ratio has risen to 300 percent, among the highest in Asia, signifying its high dependence on global demand.
"Lower global demand amid likely recessions in the U.S., the euro area and other G10 economies will weigh on 2020 growth. We see growth rebounding to 6.5 percent in 2021 given an expected demand recovery and the low base from 2020."
Vietnam recorded GDP growth of 3.82 percent in Q1, its lowest rate in a decade, as 18,600 companies suspended business, up 26 percent year-on-year.
A recent report by the International Labour Organization warned that 10.3 million workers could be impacted by the Covid-19 pandemic, losing jobs or seeing their incomes decline in the second quarter.