Macro forecasts

- We lower our 2023F GDP growth from 6.0% to 5.0% due to weaker exports and production, which are dampening the labor market and consumption. We lower our export & import forecasts for 2023 to declines of 7.3% & 10.1% YoY, respectively, from declines of 2.5% previously. We expect external demand to recover in 2024 and forecast growth in exports and imports of 10.3% and 12.6%, respectively. We maintain our 2024F GDP growth at 7.0%.

- While we believe further cuts in domestic interest rates would be appropriate, given the slowdown in growth since Q4 2022 and weak credit demand in H1 2023, we believe the State Bank of Vietnam (SBV) will be constrained from cutting the discount and refinancing rates further as VND interest rates are now lower than USD rates across the yield curve. We assume only one further cut in the deposit rate cap (for tenors of up to six months) of 25 bps to 4.50% in H2 2023 and no change in policy rates in 2024.

- We forecast the VND to depreciate by 1.0% vs the USD in 2023 and remain stable in 2024.

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