GROWTH CONTINUED TO MODERATE, INFLATION PEAKED, AND THE SBV RAISED ITS REFINANCING RATE
• The impact of the recent global market turmoil on Vietnam has been limited, so far. Q3 GDP growth picked up to 6.1% y/y, but remained below trend. Growth softened in industry, but quickened in other sectors.
• CPI inflation fell to 22.4% y/y in September from a peak of 23.0% in August, in line with our expectations. Inflation momentum eased for the third straight month.
• The State Bank of Vietnam (SBV) surprised the market and ANZ by raising its refinancing rate by 100bps to 15.00%, effective 10 October. We think the move was reasonable and will help fight inflation.
• VND outperformed all other AXJ currencies and remained stable against USD in September. However, depreciation pressures have increased.
REAL ACTIVITY: Q3 GDP GROWTH PICKED UP, BUT REMAINED BELOW TREND
• Real GDP in Q3 climbed 6.1% y/y from 5.7% in Q2, but remained below the long-term average of 6.8%.
• Industry growth softened to 7.3% y/y from 8.2% in Q2, as manufacturing growth declined. Other sectoral growth quickened with the service sector having contributed the most to real output growth. Growth across all sectors was below their respective long-term average.
• In nominal terms, Q3 GDP growth eased to 25.8% y/y. Both primary and secondary sector growth decelerated, while growth in the service sector accelerated. The implied GDP deflator eased to 19.7% in Q3, from 21.9% in Q2.