In 2024, UOB maintains its forecast for Vietnam's economic growth at 6.4%, with a forecast for Q4 2024 growth of 5.2% year-on-year.
On December 2, UOB Bank released a report on Vietnam's economic forecast for the fourth quarter, stating that due to the good GDP growth in the third quarter, it forecast Vietnam's economic growth in 2025 at 6.6%.
The third quarter had the highest growth rate
UOB experts said that Vietnam's real GDP growth achieved better-than-expected results in the third quarter of 2024, increasing sharply by 7.4% compared to the same period last year, exceeding the market's average forecast of 6.1% and the bank's forecast of 5.7%.
“This is the highest growth rate since 3Q22, when economic activity has recovered strongly from the pandemic trough. This latest result has contributed to expanding the 7.09% (adjusted) growth in 2Q24, resulting in a cumulative growth of 6.82% in the first nine months of 2024 compared to the same period last year. The surprise result in 3Q24 reflects the resilience of the economy, despite the devastation caused by Typhoon Yagi,” said UOB experts.
According to UOB, although all major sectors were affected by the storm, agriculture, forestry and fishing output in 3Q24 overall grew by 2.6% year-on-year (slower than 3.6% in 2Q24). Manufacturing output continued to accelerate at 11.4% year-on-year from 10.4% in 2Q24. The services sector grew by 7.5% year-on-year following 7.1% growth in 2Q24.
Overall, in the third quarter of 2024, the service sector was the main driver contributing to GDP growth with 3.24 percentage points, followed by industry and construction with 3.37 percentage points, these two sectors accounted for 89% of the overall increase of 7.4%.
The latest data released shows that Vietnam’s growth trajectory remains on track. As of October, Vietnam’s exports increased by 14.9% year-on-year, maintaining double-digit growth so far.
“For the full year of 2024, we forecast Vietnam’s exports to grow 18%, which would be the strongest since 2021. Imports are forecast to rise 16.8% year-on-year in the January-October period, resulting in a trade surplus of US$22.3 billion for the 10 months, the second-largest trade surplus on record after US$28 billion in 2023,” said UOB experts.
In this regard, the growth momentum of foreign direct investment (FDI) continued to expand, with registered FDI inflows reaching US$27.3 billion in the first 10 months of 2024, up 2% year-on-year. Actual FDI inflows as of October reached US$19.6 billion and are on track to record FDI inflows for the third consecutive year.
Domestically, retail sales growth momentum in 2024 has remained largely stable so far, with a 7.1% increase in October and an average year-to-date increase of 8.5% year-on-year and compared with a 10.4% increase in 2023 as a whole. This was partly supported by a 41% increase in tourist arrivals, to 14.1 million year-to-date through October. This was driven by increases from top tourist sources including South Korea, China, the Taiwan (China) region, the US and Japan.
However, compared to the pre-COVID-2019 boom, tourist arrival data continues to decline and may take another one to two years to return to pre-pandemic levels.
“Given the above factors, we maintain our 2024 economic growth forecast for Vietnam at 6.4%, with a forecast of 5.2% y-o-y growth in Q4 2024. For 2025, we forecast a growth rate of 6.6%,” the UOB expert emphasized.
However, UOB experts also said that with the US preparing to enter a new presidential term as Donald Trump 2.0, the possibility of global trade tensions and risks could soon emerge. A key risk to note is potential trade restrictions on Vietnam, as the US's annual trade deficit with Vietnam has increased more than 2.5 times from US$39.5 billion in 2018 to nearly US$105 billion in 2023.
Overall, the US trade deficit with ASEAN has nearly doubled to $200 billion in 2023 from less than $100 billion in 2018, with global trade dynamics and supply chains shifting in response to restrictions imposed during Trump 1.0.
The State Bank will maintain stability
According to UOB experts, with the economy still growing strongly in 2024 and continuing into 2025, the State Bank of Vietnam is not under much pressure to loosen policy quickly. Inflation will remain below the target of 4.5% from June 2023, thus reducing much of the pressure on the State Bank.
“However, with global trade tensions expected to continue to rise under Trump and the accompanying strength of the US dollar a growing concern, the SBV is expected to be mindful of the downward pressure on the VND. As such, we expect the main refinancing rate to remain at its current level of 4.50%,” UOB experts said.
In addition, the VND has been through a volatile period in the past few months. After recording its largest quarterly gain (3.5%) since 1993 in Q3/2024, the VND reversed all gains in October and November. Despite its solid foundation, the VND is still being held back by external factors such as the USD recovering as the market reprices the scenario of fewer Fed rate cuts in Trump 2.0./.
Source
Comment (0)