HSBC Global Research has just released the report “Vietnam at a glance - Regaining the glory”, accordingly raising Vietnam's GDP growth forecast for 2024 to 6.5% (previously: 6%) and maintaining the GDP growth forecast for 2025 at 6.5%.
The report states that, despite a somewhat disappointing start, GDP growth Vietnam's Q2/2024 growth jumped to 6.9% year-on-year, almost the highest level in the past 2 years, far exceeding HSBC's and the market's expectations of 6%. Combined with a slight upward adjustment to Q1/2024 growth, this result brought the growth of the first 6 months of the year to 6.4% year-on-year.
Not only is the growth impressive, but it is encouraging that it is starting to spread. The most surprising sector was manufacturing, which grew by 10% year-on-year.
On the trade front, the recovery in technology continues to provide much-needed resources while other sectors have also bottomed out to regain convincing growth. Meanwhile, tourism-related services continue to shine after Vietnam welcomed more than 8.8 million visitors in the first half of 2024, surpassing the 2019 level. Notably, even without the visa exemption mechanism, the number of returning Chinese tourists has reached 80% compared to that time. “Although Vietnam is on track to achieve its target of welcoming 17-18 million visitors in 2024, we still see room for further improvement, including expanding the visa exemption list,” HSBC experts said.
Unlike the external sector, retail sales growth has yet to regain its pre-pandemic momentum. HSBC estimates that it is still well short of its pre-pandemic trend, at 10%, but the spillover effect will eventually reach the domestic sector as the external recovery continues to spread, but the impact is likely to become more pronounced in the fourth quarter of 2024.
Notably, the report also mentioned the issue of inflation. 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 caused June inflation to increase year-on-year. However, HSBC experts believe that inflation is likely to decline in the second half of 2024 when the favorable base effect begins to take effect.
“But this forecast must of course also exclude the possibility of widespread disease affecting pork supply, and we must not forget that previous outbreaks of African swine fever caused inflation to exceed the State Bank of Vietnam’s target,” the report stated. At the same time, HSBC experts have also recently reduced their 2024 inflation forecast to 3.6%.
In summary, with better-than-expected growth in the first half of 2024, HSBC Global Research has raised its GDP growth forecast for 2024 to 6.5% (previously: 6%). This means that Vietnam will likely become economic growth fastest in ASEAN in 2024, a position Vietnam temporarily ceded to Malaysia and the Philippines in 2022 and 2023.
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 policy interest rates stable at 4.5% this year despite lingering foreign exchange concerns that could prompt the State Bank of Vietnam to raise interest rates. However, a rate hike is not in our forecast outlook,” HSBC Global Research emphasized.
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