According to Agriseco, Fed rate hike, Russia-Ukraine conflict, risk of global recession, China’s Zero-COVID policy, inflationary pressure and exchange rate are the 5 main risks to the economy in the last months of the year.
The latest report of Agribank Securities (Agriseco) mentions 5 main risks affecting the world economy and Vietnam’s economy in the last months of 2022.
The first risk is that Fed raises interest rates. Experts here said that a quick rate hike by the Fed could slow down the growth of the global economy.
In the period 2008-2009, due to the impact of the world financial crisis, interest rates above 20% caused many businesses to go bankrupt and the economy fell into difficulties.
In addition, the Fed’s interest rate hike will cause the USD exchange rate to rise and the domestic currency to depreciate. This creates favorable conditions for countries’ exports to the US, but difficulties in imports and inflationary pressure on importing countries increase.
The third effect is to cause financial market volatility. Analysts said that a sharp increase in interest rates could make the financial market volatile. Investment capital flows into the stock market have the risk of withdrawing from emerging markets and finding safe channels and areas with rising interest rates.
Besides, it also increases the cost of foreign loans and increases the borrowing costs of businesses, households and individuals.
About Russia-Ukraine conflict, the analysis block shows two main effects. The first is to disrupt the supply chain and escalate the price of goods.
Russia is a country that supplies about 40% of gas and 25% of oil, and Ukraine is a transit country for crude oil to EU countries. Therefore, this event had a strong impact on oil prices. Russia and Ukraine are also two major exporters of grains, metals (palladium, copper, nickel, gold), and chemicals in the world. The conflict will cause import and export activities to be affected and the supply chain to be disrupted, thereby pushing up prices.
The second impact is the high price of energy and food while the supply shortage has made the concern about food and energy security become more obvious. Many countries are restricting the export of food products and agricultural materials to ensure domestic supply, such as India (banning wheat exports), Ukraine (wheat, oats, sugar). …), Indonesia (palm oil).
The next risk is risk of global recessionAgriseco believes that the global economic recession will cause very serious consequences such as declining economic growth, business results of enterprises, reduced commercial activities and high unemployment rate.
It may take several years for the economies of the countries at risk to recover and the stock market to develop. Historically, the economy fell into a recession like the one in 2007-2008, stock indexes often dropped sharply. Stock indexes in Asia, America or Europe sometimes fell more than 70%. The fear of recession and the deterioration of business performance on the exchange also led to sell-offs on the exchange in the above periods.
Analysis of China’s Zero-COVID Policy, Agriseco’s analysis block believes that this causes two main impacts on the world economy, including disruption of freight transport; shortage of raw materials.
With Vietnam, there are also certain influences. Firstly, imports of goods from China account for 33% of total imports (in 2021), this country supplies materials for many manufacturing industries such as textiles, footwear, chemicals, electronic equipment, etc. Thus, the growth rate of the manufacturing sector may slow down if the blockade situation persists.
Second, China is one of Vietnam’s important export markets, accounting for about 17% of export value (in 2021). Therefore, the blockade of China will have a great impact on export activities, affecting the economic growth rate.
Agriseco also mentioned Inflation and exchange rate pressures in Vietnam.
July CPI increased by 2.96% and 7 months of 2022 increased by 2.44% over the same period last year. Inflation increased mainly because domestic gasoline prices from the beginning of the year increased by more than 50% over the same period; commodity and consumer staples prices increase with input material prices and transportation costs.
The USD/VND exchange rate increased by about 2.5% compared to the beginning of the year because the Fed and EU central banks are tightening monetary policy. This caused the VND to decrease by 3% over the same period. Under pressure to increase the exchange rate, the SBV took measures to stabilize such as selling USD to meet the demand for foreign currency and sucking VND out of the commercial banking system.
Analysts believe that inflationary pressure in Vietnam in the second half of the year is due to Vietnam’s open economy (200% of GDP) and the impact of “cost push” and “demand-pull” factors. may affect the Government’s target of controlling inflation below 4%.
However, the Government is making efforts to implement measures to regulate inflation such as reducing taxes on environmental protection of petrol and oil; continue to reduce electricity, water and tuition fees.
According to Agriseco, the rising exchange rate affects indirect investment capital flows (foreign investors often net sell when the exchange rate tends to increase), as well as put pressure on inflation in Vietnam, affecting business activities. business of enterprises with a large import proportion (inflation import effect).
