Vietnam Business Forecast Report Q1 2013 - New Study Released

Recently published research from Business Monitor International, "Vietnam Business Forecast Report Q1 2013", is now available at Fast Market Research

by Bill Thompson

(WireNews+Co) - Boston, MA - 04 January 2013

Core Views

Vietnam's real GDP growth accelerated from 4.7% year-on-year (yo- y) in Q212 to 5.4% in Q312, reinforcing our view that the economy is poised for a robust recovery in 2013. We see scope for a robust rebound in private sector investment growth as lending rates decline over the coming months.

The recent jump in month-on-month (m-o-m) headline consumer price inflation from 0.6% in August 2012 to 2.2% in September has proven to be a one-off scare for policymakers. The latest reading, which saw m-o-m inflation moderate to 0.9% in October, has helped to alleviate concerns that the State Bank of Vietnam could be in a tight spot of having to guide monetary policy amid a stagflationary environment. We reiterate our view that the State Bank of Vietnam will keep its policy rate on hold at 10.00% for the greater part of 2013.

View Full Report Details (http://www.fastmr.com/prod/513939_vietnam_business_forecast_report_q1_2013.aspx) (http://www.fastmr.com/prod/513939_vietnam_business_forecast_report_q1_2013.aspx)

We see increasing risks that the Vietnamese government may need to incur significant costs to bail out the banking sector. There is also growing pressure to cut corporate income tax to support private sector investment, suggesting that the authorities will need to speed up tax reforms and cut spending in other areas over the coming months to finance the budget. Overall, we believe that the government is unlikely to achieve its target of keeping the budget deficit under 4.8% in 2013. We forecast a budget deficit of 5.1% of GDP in 2013, following a 5.0% deficit in 2012.

Major Forecast Changes

We have upgraded our real GDP growth forecast from 6.5% to 7.0% for 2013. We expect Vietnam to run a relatively balanced current account, with a negligible deficit in 2013.

Key Risks To Outlook

Downside Growth Risks From Rising Commodity Prices: Should commodity prices witness a strong rebound in 2013, we could see the central bank adopting a more hawkish stance on monetary policy. The risk of having to hike interest rates aggressively would present significant downside risks to economic growth.

Further Deterioration In External Demand: Despite multiple devaluations since late 2009, Vietnam's trade deficit has witnessed a steady improvement. However, should we fail to see a sustained improvement in the trade balance, we would not be surprised to see the Vietnamese dong coming under further selling pressure.

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