Entries for 'Vietnam'

Russia’s war on Ukraine has caused a strong surge in commodity prices, as well as uncertainty regarding global growth and the outlook for inflation. We have revised down our growth forecast for the ASEAN-5 and South Korea. Rising inflation will prompt central banks to begin policy normalization in ’22. Current account dynamics will be driven by relative exposure to commodities. Risks stem from an uncertain outlook for China and higher energy prices.

We have revised our 2021 growth outlook for ASEAN+ from 4.5% to 3.6%. This is mostly due to lockdowns weighing on manufacturing and services. However, ASEAN+ countries have more policy space to respond to shocks. Non-resident capital flows are projected to rebound this year to $228 bn. FDI and portfolio debt are key drivers but 21H2 will likely see a slowdown. Nonetheless, we expect flows above pre-pandemic levels in 2021 and 2022.

ASEAN-5 countries experienced strong, export-driven growth in 2021H1. However, the COVID Delta variant is already affecting business sentiment. With vaccination rates still low, we expect growth to slow markedly in H2. Lockdowns in the ASEAN-5 are also beginning to affect global value chains. We expect monetary and fiscal policies to remain supportive into next year.

ASEAN countries will bounce back from the COVID-19 shock this year. However, the pace of the recovery varies due to uneven pandemic control. Supply chain disruptions subside, and ASEAN exports are rising sharply. Fiscal and monetary policy stances will likely remain supportive this year.

We expect Frontier Asia to remain broadly resilient to the COVID-19 shock. Loose monetary and fiscal policies will extend into ‘21 and support growth. However, tourism will continue to weigh on growth and current accounts. Trade tensions and growing debt are the key risks to their economic outlook.

The ASEAN region is now China’s largest trading partner, top tourism destination, and a key investment partner. However, the depth of these relationships vary among the individual ASEAN member states. We expect economic integration to continue in the region.

Vietnam has further integrated into regional supply chains. It has benefited from US trade diversion away from China, and production reallocation and investment by Chinese firms. The key risk is the US changing its policy stance towards Vietnam.

Frontier market debt rose by over $250 billion in 2018, reaching $3.2 trillion for the 26 countries in our sample. Zambia, Vietnam, and Tunisia saw the largest rise in debt ratios.