Vietnam's GDP growth in the second quarter of 2024 accelerated to 6.9% year-on-year, up from 5.7% in the first quarter. This acceleration came from both the manufacturing and service sectors, thereby affirming the economy's sustainable recovery.
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| Ms. Ngo Thi Hong Minh, Head of Financial Markets and Capital Resources of Citi Vietnam |
Domestic demand improved significantly. Net exports continued to grow strongly, up 17% year-on-year.
Vietnam’s economic recovery began late last year and was driven by rising manufacturing exports and expanding FDI. Although domestic consumption has recovered more slowly, growth has remained steady, with promising signs in the second quarter.
Citi has raised its forecast for Vietnam’s GDP growth in 2024 from 6% to 6.4%, corresponding to an optimistic growth rate in the 6-6.5% range. The impressive GDP growth in the second quarter compared to the same period last year was also due to more favorable fundamental impacts on the economy as Vietnam has overcome the challenges it faced during this period last year.
“Based on this solid recovery foundation, we are confident in Vietnam’s ability to overcome obstacles to continue on its positive growth path. The FDI sector remains an important driver of economic growth and Citi is committed to supporting investment flows into Vietnam as well as promoting the growth of its FDI client base currently operating in Vietnam,” said Ms. Ngo Thi Hong Minh, Head of Financial Markets and Treasury, Citi Vietnam.
With inflation still high, Citi economists remain optimistic that inflation has little room to rise further. Although food price inflation in June was quite high, weighing on the headline index, it was offset by lower fuel prices. There may be adjustments to domestic electricity prices going forward, but weaker-than-expected global growth could lead to lower oil prices in the second half of 2024 and 2025, which would help reduce transportation costs. In addition, lower rice prices in neighboring countries could reduce Vietnam's rice export demand, leading to lower domestic food price inflation.
Overall, Citi economists do not expect the 4.5% inflation target to be breached, although core inflation has edged up slightly to 2.6% year-on-year. As domestic demand continues to recover, inflationary pressures may rise but are expected to remain contained.
Despite some upward pressure on the USD/VND exchange rate, the situation has stabilized thanks to the regulatory policies of the authorities. The large current account surplus (5% of GDP) and FDI inflows (3% of GDP) in the first quarter of 2024 contributed to this stability.
Source: https://thoibaonganhang.vn/citi-kinh-te-viet-nam-hoi-phuc-tang-truong-vuot-mong-doi-153749.html
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