The economic recovery in Vietnam will likely be stronger at the end of Q2 this year, on rallying domestic demand and tourism.

This is according to Standard Chartered Bank’s latest macro-economic research report for Vietnam, which forecasts economic recovery to accelerate significantly this year. GDP is set to grow by 6.7% in 2022. 

Analysts at Standard Chartered said the country is a key manufacturing centre and link in the global supply chain, despite challenges arising from geopolitical issues and the pandemic.

That said, they added that Vietnam may face short-term risks, particularly related to the recovery of the tourism sector and the Covid crisis, reports Vietnam Plus.

According to Standard Chartered Economist for Thailand and Vietnam, Tim Leelahaphan, the re-opening of Vietnam’s tourism sector – which makes up 10% of the country’s GDP – will need to be seriously evaluated in Q2, following two years of pandemic-related closure.

In addition, foreign direct investment inflows have increased this year, following 2021 slowdown. The bank forecasts this will continue, particularly in terms of electricity generation and supply, petroleum and air conditioning equipment.

Leelahaphan added that foreign investors will still be the driving force for Vietnam contributing to the global supply chain.

A number of large tech firms have relocated production, or are planning to, from China to Vietnam over the past few years, in a bid to diversify supply chains. The Standard Chartered Economist added that Vietnam is still a regional manufacturing hub in terms of electronics, textiles and footwear.

Furthermore, the bank maintains its inflation forecast for the country at 4.2% for this year and 5.5% for 2023, stating that supply factors will fuel risks of rising inflation, particularly the current geopolitical tensions.