Following three consecutive 50 basis point reduction to the policy rate by the State Bank of Vietnam (SBV) in the previous three months, HSBC forecasts a major economic recovery in Vietnam beginning in the fourth quarter (Q4) of 2023.
HSBC emphasised the SBV's necessity to boost growth through the loan channel. According to a paper headlined 'The State Bank of Vietnam: Third Time's a Charm,' the rate cuts are expected to continue lowering financing costs for enterprises and consumers, thereby increasing economic investment and bolstering consumer optimism.
Moreover, the SBV is predicted to effectuate one more 50 base point cut in the easing cycle in Q3 2023, to further support growth. This possible move could bring the policy rate to 4.0 per cent, mirroring the rate cuts during the pandemic and counteracting the tightening measures of 2022.
The bank’s recent actions underscore its ongoing optimism regarding inflation, which the report maintains is ‘under control’. The SBV’s optimism is substantiated by a cooling inflation rate, recently dipping below 3 per cent YoY, considerably under the 4.5 per cent ceiling. This trend has allowed HSBC to revise its 2023 inflation forecast down to 2.6 per cent from 4.0 per cent.
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