HSBC Global Research has just raised its forecast for Vietnam’s GDP growth in 2024 to 6.5%, compared to 6% previously. This means that Vietnam will likely become the fastest growing economy in ASEAN in 2024.
In the recently released report "Vietnam at a glance - Regaining the glory", Ms. Yun Liu, economist in charge of ASEAN market, HSBC Global Research Department, said that growth Vietnam's GDP in the second quarter of 2024 increased by 6.9% over the same period last year, almost the highest level in the past two years.
Combined with a slight upward adjustment to Q1-2024 growth, this brings the growth for the first half of the year to 6.4% year-on-year. Not only is the growth convincing, it has begun to show signs of spreading.
The most surprising sector, according to HSBC experts, was manufacturing, which grew 10% year-on-year. This result was also reflected in strong export growth in the second quarter, reaching 15% year-on-year.
While the recovery was largely led by electronics, other sectors are also starting to show signs of recovery. For example, textile and footwear exports, which were hit by disruptions in the Red Sea, saw double-digit growth in the second quarter.
The sentiment of manufacturers has also improved significantly. The PMI index in June increased sharply to 54.7 points, the highest level in the past two years. The employment situation and new export orders have also increased compared to recent months, a "guarantee" of a better outlook for the manufacturing sector in Vietnam.
With better-than-expected growth in the first half of 2024, HSBC Global Research raised its GDP growth forecast for 2024 to 6.5% from 6% previously. At the same time, it kept its GDP growth forecast for 2025 unchanged at 6.5%.
"This means that Vietnam will likely become the fastest growing economy in ASEAN in 2024, a position it temporarily ceded to Malaysia and the Philippines in 2022 and 2023," the report said.
Inflation will be below 4%
While short-term trade is starting to pick up, the long-term FDI outlook remains bright, with manufacturing accounting for the lion’s share, with newly registered FDI reaching nearly $10 billion in the first six months of 2024 (4% of GDP). While much of the capital is directed towards manufacturing, real estate is also emerging with strong growth compared to last year’s decline.
HSBC experts also predict inflationary The average inflation in the second half of the year will ease to a little over 3% and inflation for the whole year of 2024 will drop to 3.6%.
Accordingly, unlike growth, inflation seems to be an immediate concern. While falling oil prices have helped ease the situation, rising pork prices, due to the ongoing African swine fever epidemic, have pushed up June inflation compared to the same period last year.
However, HSBC experts believe that inflation is likely to decline in the second half of 2024 as the favorable base effect begins to take effect.
HSBC experts also noted that the stability of the trade recovery and the extent to which this recovery spills over into the domestic sector are factors that need to be closely monitored.
"We also maintain our view that the State Bank of Vietnam will maintain its policy rate steady at 4.5% this year, despite lingering foreign exchange concerns that could force the State Bank of Vietnam to raise interest rates.
However, interest rate hikes are not in our forecast scenario," HSBC Global Research emphasized.
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