After Typhoon Yagi, what is the forecast for Vietnam's GDP?
Báo Tin Tức•25/09/2024
Some economic experts are concerned that in the context of an economy with many risks due to dependence on uncontrollable external demand, the severe damage caused by storm No. 3 (Yagi) and its circulation will affect Vietnam's GDP this year.
Experts say that what needs to be done right now is to provide emergency relief to affected people, rebuild efforts, and support production and business recovery after the storm.
At the press conference "Vietnam Economic Update" on September 25, ADB experts in Vietnam said: Vietnam needs to redouble its efforts to accelerate the disbursement of public investment capital . This will directly support the construction and manufacturing sectors, creating more job opportunities. According to ADB Country Director in Vietnam, Mr. Shantanu Chakraborty, Vietnam's economy has recovered strongly in the first half of 2024 and continues to maintain growth momentum, despite global uncertainties. The steady recovery was achieved due to improved industrial production and strong growth in trade... "Economic growth forecasts are maintained at 6% this year and 6.2% in 2025. Inflation is expected to remain at 4% in both years due to persistent pressure from geopolitical tensions and disruptions in global supply chains," the ADB report stated. According to ADB, export-oriented industry remains the main growth driver of Vietnam's economy. The gradual return of new orders and a recovery in consumption have restored manufacturing growth in the first half of 2024, and a stronger momentum is expected to continue throughout the year. "On the demand side, expansionary fiscal policy and loose monetary policy will continue to support currently low consumption. Public investment will play a key role in the economic recovery and growth in 2024. Fiscal support and increased public investment will further stimulate demand in the remaining months of 2024," said ADB's representative in Vietnam. Due to the damage caused by Yagi, UOB Bank (Singapore) revised down Vietnam's GDP growth forecast for 2024 to 5.9% (down about 0.1% percentage point compared to the previous forecast of 6%).
UOB said that Vietnam's growth momentum was affected by severe natural disasters.
"For Q3/2024, UOB Bank forecasts Vietnam's growth to slow to 5.7% (down from 6% previously) and to 5.2% (down from 5.4% for Q4/2024). This is still a positive recovery from the 5% growth in 2023," the UOB report stated. The 2025 GDP growth forecast has been revised up by about 0.2% percentage points to 6.6%, reflecting an expected increase to offset earlier declines. According to UOB, the impact of Yagi will be more clearly felt in late Q3/2024 - early Q4/2024 in the northern regions of Vietnam. The impact will be reflected in reduced output and damaged facilities across many sectors such as manufacturing, agriculture and services. However, beyond these temporary disruptions, long-term fundamentals remain quite solid. Exchange Speaking to reporters of Tin Tuc newspaper on September 25, Associate Professor - Dr. Dinh Trong Thinh said that the consequences of Yagi could affect production activities, thereby affecting the supply chain of goods in export as well as supply to the domestic market. This could cause GDP growth in 2024 to decrease compared to the original target. Associate Professor, Dr. Dinh Trong Thinh hopes that ministries, branches and localities will promote public investment disbursement. Currently, the amount of disbursement needed in 2024 is still large and this is an important driving force in promoting economic growth. In addition, quickly overcome the consequences of storm No. 3 and repair infrastructure in affected areas, in order to restore traffic and communications, as well as support production recovery. Support people and businesses to recover "It is necessary to consider supporting businesses in areas affected by storms and floods to ensure workers' welfare; At the same time, ensure conditions for businesses to return to production as quickly as possible, and fulfill signed orders as well as export orders," Mr. Dinh Trong Thinh proposed.
Dr. Nguyen Duc Do - Deputy Director of the Institute of Economics and Finance (Academy of Finance) assessed that export is one of the main drivers of recovery of Vietnam's economy, reflected in the export growth figure in the first 8 months of 2024 at 15.8%. This result is thanks to the recovery of consumer demand in some markets such as the US and Europe, along with political instability in some countries, leading to orders shifting to Vietnam. The Federal Reserve's (Fed) reduction of operating interest rates will also have some impact on exchange rates, helping businesses with large debts such as manufacturing and exporting to reduce financial pressure. Banks have more room to lower interest rates, helping to stimulate consumption, promote production, and increase demand for imported goods and raw materials. Accordingly, Vietnam's export activities will grow positively in the next 3-6 months. In the context of many risks in the economy, economic expert - Dr. Le Duy Binh said that Typhoon Yagi has reduced the favorable growth path with the initial GDP target of 7%. "I still believe that there are other supporting factors of the economy, other growth drivers in other localities that will compensate. Vietnam continues to promote monetary policies related to interest rate reduction, debt forgiveness, debt extension and fiscal policies to exempt and reduce taxes for businesses and people", said Dr. Le Duy Binh. Despite the damage caused by the storm, the VNDirect Securities expert said that he still maintains the GDP growth forecast for 2024 at 6.5% thanks to growth supporting factors such as: The government's expected support programs for people and businesses affected and economic recovery after the storm; import-export activities are more active than expected and the global credit environment is gradually easing. The Government has assigned the State Bank of Vietnam (SBV) to plan and implement policies such as debt extension, deferral, debt forgiveness, and credit policies; The Ministry of Finance is studying the reduction, extension and postponement of taxes, fees and charges. Meanwhile, the Ministry of Industry and Trade ensures the supply of input materials for production and business. To boost growth, the Government will further accelerate the disbursement of public investment and National Target Programs. “With positive Purchasing Managers’ Index (PMI) data and new manufacturing orders in the past few months, we maintain a positive assessment of export prospects in the last months of this year,” VNDirect’s report stated. “Although Typhoon Yagi has caused prices of some food and foodstuffs to increase, especially some vegetables, we believe that the impact of the typhoon on inflation will be insignificant. On the contrary, the decrease in gasoline prices, the high base level compared to the same period last year and the reduction in import costs thanks to the cooling exchange rate are significantly supporting inflation control,” said the VNDirect expert.
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