UOB: Exchange rate forecast to increase this year

ANTD.VN - In 2025, VND will still be vulnerable to external factors such as the new US President's tariff policy and the Fed's interest rate policy. Accordingly, the exchange rate could exceed 26,000 VND/USD in the second quarter and reach 26,200 VND.

Raising GDP growth forecast to 7%

UOB Bank (Singapore) has just released a report on Vietnam Economic Outlook 2025. Accordingly, the bank assessed that Vietnam's GDP will continue to grow strongly in the fourth quarter of 2024, reaching 7.55% year-on-year from the adjusted 7.43% in the third quarter of 2024. This figure is much higher than the market's average forecast of 6.7%.

With a surprisingly strong performance in the last 3 quarters, Vietnam's economy has grown by 7.09% in 2024 compared to 5.1% in 2023, surpassing the general market forecast of 6.7% and the official target of 6.5%. This is the best growth since the recovery from Covid-19 in 2022 (8.1%).

When analyzed in detail, the industrial manufacturing and service sectors are the main drivers since the growth trend started to accelerate in mid-2023 and contributed 35% and 48% respectively to the 7.55% growth in Q4 2024.

Accelerating foreign trade activity is the main reason for Vietnam's strong growth. Exports have increased in the past 10 months, with December posting a 12.8% increase compared to the same period last year, with full-year growth of 14%, compared to a 4.6% decline in 2023.

Imports are expected to rise 16.1% in 2024 with a trade surplus of around US$23.9 billion, the second largest after a record high of US$28.4 billion in 2023. This is the ninth consecutive year that Vietnam has recorded an annual trade surplus, which will be helpful in anchoring the VND exchange rate.

Regarding the 2025 outlook, UOB experts assessed that the 8% GDP growth target set by the Government “seems quite ambitious but there is still room to achieve”.

UOB raises Vietnam's economic growth forecast to 7%

Based on the continued strong momentum from 2024 combined with consideration of risks and headwinds from upcoming trade conflicts from the new US administration, UOB raises Vietnam's GDP growth forecast for 2025 to 7.0% (previously: 6.6%).

“We expect positive changes from domestic drivers such as production, consumer spending and tourist arrivals to contribute to activities, especially in the first half of the year,” experts said.

However, according to experts, uncertainty about the trade outlook will be a major risk for Vietnam in the second half of the year, with increasing dependence on exports, which have risen to a record high of more than 400 billion USD in 2024, nearly equal to the size of Vietnam's nominal GDP of 450 billion USD.

Interest rates have not increased, exchange rate may go up to 26,000 VND/USD

With headline and core inflation remaining below the official target of 4.5% in 2024, especially towards year-end, UOB said this has opened up the possibility for the State Bank of Vietnam (SBV) to ease its policy stance.

However, the exchange rate is now another consideration for the SBV and it is likely that the SBV will keep its policy interest rate unchanged to counter depreciation pressure on the domestic currency.

“Given the future uncertainty regarding the US Federal Reserve’s policy rate adjustment cycle and geopolitical/trade tensions following US President Trump’s inauguration, we expect the SBV to keep its policy rates unchanged for the time being, with the refinancing rate held at 4.50%,” the bank forecast.

The VND has weakened against the US dollar, along with other Asian currencies, since the end of the third quarter of 2024 amid the tense US presidential election. Accordingly, the VND ended 2024 at a record low of 25,485/USD, down 5% for the year and the third consecutive annual decline.

In 2025, VND remains vulnerable to external factors. The market has revised its forecast to fewer Fed rate cuts under Trump 2.0, meaning USD strength will continue to be supported. VND is likely to be affected by Trump’s tariff policies and the trend of the Chinese yuan.

“External downsides are unlikely to disappear in the short term, and the VND is likely to continue to depreciate against the USD. Overall, we forecast the USD/VND exchange rate at 25,800 in 1Q25, 26,000 in 2Q25, 26,200 in 3Q25 and 26,000 in 4Q25,” UOB experts forecast.

Source: https://www.anninhthudo.vn/uob-du-bao-ty-gia-co-the-tang-trong-nam-nay-post600821.antd