Vietnam - Vietnam's GDP growth to fall to 5.7 %, inflation to slowdown in 2012

Vietnam's CPI is likely to rise 10.5% by the end of second quarter 2 and ease at 8.4% by the end of third quarter of 2012, before it rises again to 9.2% for the whole year 2012, according to HSBC Vietnam.

According to HSBC, inflation slowed down to 17.3% in January over the same period last year, and this figure is expected to be at a single digit at the end of 2012.

Even the local currency has become more stable and also the depreciation of Vietnam dong has no longer been mentioned. This is because of the central bank's efforts to gradually weaken the dong and ease needs of imports.

Although the situation was quite satisfactory, the majority of investors and Vietnamese people are still cautious. This forecasts domestic demand and exports will decrease in 2012. Even though it is forecast that interest rates will be further relaxed in 2012, consumers and investors are not too interested in boosting spending because they have re-adjusted their expectations after high inflation last year.

According to HSBC, Vietnam's GDP growth will fall from 5.9% in 2011 down to 5.7% in 2012.

"Thus, although 2012 is likely to provide a better macro-economic stability, inspite of weak global economic conditions along with the cautious psychology in Vietnam, the local economy will remain below the average growth in the long term," the HSBC report said.

According to HSBC, inflation in 2011 is the main challenge that makes Vietnamese people and foreign investors cautious in 2012. Inflation rate of January 2012 marked the fifth consecutive decline compared to 23% peak in August 2011 based on comparison with same period of each year.

HSBC forecasts that Vietnam's CPI is likely to rise 10.5% by the end of second quarter 2 and ease at 8.4% by the end of third quarter of 2012, before it rises again to 9.2% for the whole year 2012.

"There are still a few high risks, especially due as electricity prices are likely to rise and oil import duty has increased (from 0% to 4% in December 2011). Despite the downward trajectory is needed, we believe that is not enough to change the caution of consumer psychology. Memories of 2011 are still in front,” said HSBC.

Although likely to be subdued this year due to inflation ease, the challenges mentioned above have left lasting impact to Vietnamese people and international investors. As a result, investors will be more cautious than last year and will run like the type of wait and see, indicating both their disbelief and trust on economic structural reform which is said to also have to take time to promote efficiency.

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