India's economic changes lead to fluctuations in Southeast Asian countries, which include Vietnam.
Finance Minister Nirmala Sitharaman on Tuesday tabled the economic survey in Parliament, a day before presenting the Union Budget 2023. In the survey, which is a review of how the economy fared in the past year, the government said that India has nearly "recouped" what was lost, "renewed" what had paused, and "re-energized" what had slowed during the pandemic. The annual pre-Budget survey also forecast India's economy to grow at 6.5 percent in fiscal 2024.
The economic survey further said that India's recovery from the COVID-19 pandemic was relatively quick, and growth in the upcoming year will be supported by solid domestic demand and a pickup in capital investment.
It also talked about the "multiple structural changes" that have been implemented over the past few years and added that the private sector was repairing balance sheets.
The survey presented the reasons for India's economic resilience - a relatively higher growth forecast among major economies, projected retail inflation only slightly higher than the tolerance limit, an estimated current account deficit financeable with normal capital inflows and forex reserves large enough to finance close to a year's imports.
In the section on India's inclusive growth, the economic survey said that the country is the third-largest economy in the world in terms of purchasing power parity (PPP) - a tool used to determine the exchange rate of currencies while comparing the cost of living and wealth across nations worldwide.
However, talking about the rupee, the survey said it may remain under depreciation pressure on account of plateauing of exports and subsequent widening of the current account deficit.Whilst, Standard Chartered Bank forecasts Vietnam’s economic growth at 7.2% in 2023 and 6.7% in 2024, following a solid recovery to 8.0% in 2022.
The forecast is highlighted in the bank’s recently published global research report on Vietnam, titled “Vietnam – Still enjoying high-growth status”.
“We still have a conviction on Vietnam’s high growth potential over the medium term,” said Tim Leelahaphan, Economist for Thailand and Vietnam, Standard Chartered. “While macro indicators moderated somewhat in Quarter 4 2022, they remain largely robust. Retail sales posted solid growth in the second half of 2022, implying improved domestic activity.”
According to Standard Chartered’s economists, the trade balance has tentatively improved; exports may face global headwinds; imports are at risk of reversal. FDI disbursements have continued to increase, but the outlook hinges on the global economy. Inflation may pose a threat to Vietnam’s continued recovery.
Inflation is anticipated to rise throughout 2023, potentially reaching 6% in the final months of the year and averaging 5.5% in both 2023 and 2024 (from 3.2% in 2022). Vietnam’s fiscal deficit may persist and be a source of inflation.
According to Tim, the Vietnamese dong has recovered sharply in recent weeks, however, the pace of Vietnamese dong appreciation is likely to slow down, as several headwinds persist. The replenishment of FX reserves is likely to be a key priority for the central bank. An improving Current Account backdrop and tourism recovery are likely to be supportive of the Vietnamese dong. The USD/VND exchange rate is forecast at 23,400 by the end-2023 and 23,000 by end-2024.
