HSBC: Economy will recover well in the second half of the year

HSBC forecasts economic growth to accelerate in the second half of the year, while UOB believes major central banks cutting interest rates will benefit Vietnam's economy.

Newly released reports by HSBC and UOB have both maintained their growth forecast for Vietnam this year at 6%. The move was made after the General Statistics Office announced that GDP in the first quarter grew by 5.66%, the best first quarter result in the 2020-2023 period.

However, HSBC revised its growth forecasts for the quarters, with Q2 and Q3 coming in lower than previously forecast, but raised its outlook for Q4 to reflect expectations that the recovery will be more widespread in the second half of the year. "We believe Vietnam is on track to see better growth prospects in 2024, although it will take time for the recovery to be widespread," HSBC said in the report.

Meanwhile, UOB forecasts a “positive outlook for 2024, although upside risks remain.” Challenges include the Russia-Ukraine and Israel-Hamas conflicts that could disrupt global trade and energy and commodity markets. In return, grounds for optimism for growth in the coming quarters include a recovery in semiconductor demand, steady growth in China and the region, and the possibility of monetary policy easing by major central banks.

However, the economic picture still has mixed bright and dark patches that need to be monitored. Export manufacturing is regaining its form, along with a bright spot in the long-term prospects of FDI, according to HSBC. In the first quarter, FDI increased by nearly 60% compared to the same period in 2023, with 65% poured into manufacturing, the rest poured into real estate.

But services were not as strong as expected, growing only 6.1% in the first three months of the year. Apart from positive tourism-related services, retail sales have not returned to pre-pandemic levels, still with a significant deficit of about 10%. Along with that, real estate contributed little to growth due to prolonged weakness.

In addition, credit growth was lackluster at the start of the year, according to UOB. As of March 25, total credit growth was 0.26%, down from 1.99% in the same period last year, according to the General Statistics Office. "The weak credit demand is due to a variety of reasons and may take some time to return to normal," UOB said.

The bank believes that the improved growth outlook and recent rise in inflation could make the State Bank of Vietnam more cautious in any changes to policy rates. As such, UOB expects the refinancing rate to remain at the current 4.5%, which HSBC expects to remain at until 2025.

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