HSBC maintains its 2016 GDP forecast of 6.7 percent year-on-year for Vietnam as the dual engine of domestic demand and exports are expected to stay strong.

The bank’s report “Vietnam at a glance, Great expectations” released on January 5 said Vietnam’s economy “hit a sweet spot” in 2015 with GDP growing 6.7 percent, the fastest pace in eight years while inflation weakening to 0.6 percent.

Photo for illustration: nld.com.vn

GDP of last year’s fourth quarter rose by 7.1 percent, putting full-year growth at 6.7 percent, above the government’s target of 6.2 percent.

Domestic demand was the key driver behind the rise, giving a push to service sector. Full-year consumption expanded 9.1 percent year-on-year, surpassing growth of 6.5 percent in 2014.

In contrast to the significant GDP growth, inflation slowed further to 0.6 percent in 2015 due to falling prices of energy, foods and core commodities.

“The Government has set the 2016 growth target at 6.7 percent, which we think will be achieved”, the report stated.

The inflation is projected to rebound in the second half of 2016, urging the State Bank of Vietnam to shift into a tightening mode. The uncertainty around this forecast is quite high as the path of oil prices is difficult to predict.

“Together with base effects from stabilizing oil prices and a likely pick-up in food inflation”, it warned that headline inflation may move up to 3 percent year-on-year in the first half of this year and hit 5.1 percent year-on-year by the end of the second half.

Source: VNA