ANTD.VN - UOB Bank is adjusting down its forecast for Vietnam's full-year GDP growth to 5.0% (from 5.2% previously).
Vietnam's real GDP growth rate continued to increase by 5.33% year-on-year in the third quarter of 2023, from 4.14% year-on-year in the second quarter.
According to UOB, the latest data showed some encouraging signs that activities have picked up as exports increased in September after six consecutive months of decline while manufacturing output recorded its fourth consecutive month of increase. Specifically, exports reached 4.6% compared to the same period last year.
Imports also rose 2.6% year-on-year in September after 10 consecutive months of decline.
Similarly, industrial output rose 5.1% year-on-year in September, the best gain since November 2022, as the manufacturing sector recorded its fourth consecutive month of year-on-year growth in output.
This improvement was also reflected in the purchasing managers’ index (PMI) data, in which Vietnam’s manufacturing PMI recorded its first increase (above 50) in August at 50.5, after contracting (below 50) in the previous five months.
One reason for the further improvement in conditions is the continued inflow of foreign direct investment (FDI) into Vietnam. Despite subdued growth prospects and relatively slow export performance throughout the year, foreign companies continue to commit to investing in Vietnam amid the current wave of deglobalization, de-risking and supply chain shifts.
If the growth rate continues at a similar level, UOB believes that full-year FDI inflows could reach the same level of US$19.7 billion as in 2021.
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Import-export and domestic consumption are showing positive improvement. |
Domestically, consumer spending appears to have regained momentum, with overall retail trade rising 9.4% year-on-year in September after hovering below 7% in the previous three months and marking its best month since April 2023.
Retail sales rose 7.4% year-on-year in September, also the biggest increase since April 2023, while trade in services and accommodation output rose 34.7% in September after hovering around 5-10% in the previous four months, indicating that tourism activity is accelerating.
In the first nine months of 2023, Vietnam's economy grew 4.24% year-on-year, an improvement from 3.72% in the first half of 2023, but only half the 8.85% year-on-year growth rate in 2022.
This means that the official growth target of 6.5% is a challenge. To achieve this target, Vietnam will need to grow at least 12% in the fourth quarter of 2023, which is unlikely in the current context without a strong improvement in underlying demand, according to UOB.
“Despite a more solid growth in Q3, the slowdown in the first half of the year remains a significant drag. We are therefore revising down our full-year growth forecast for Vietnam to 5.0% (from 5.2% previously), assuming that real GDP growth in 4Q23 will accelerate to 7.0% y-o-y (from 7.6% previously). This will require a rapid pick-up in economic activity and orders in the coming months,” the UOB report forecast.
According to UOB, the fourth quarter is traditionally the best performing quarter in most years in Vietnam, although growth in 2023 will be pressured when compared to 2022 figures with particularly strong growth.
“On that basis, we are reducing our growth forecast with three-quarters of 2023 already passed. We maintain our 2024 forecast at 6.0%.
On monetary policy, UOB maintains its forecast for a further 100bp rate cut (to 3.50%), but the timing of the cut could be pushed to Q4/2023 and the decision may still need to be considered as the central bank will consider balancing both growth and inflation risks.
Inflation has been rising in recent months and the risk is that consumer price pressures could intensify in the near term given recent increases in food and energy prices as major oil producers cut production, the ongoing conflict between Russia and Ukraine and changes in climate/weather. UOB maintains its CPI inflation forecast for Vietnam at 3.9% for 2023.
“Therefore, our forecast of continued interest rate cuts by the SBV in the fourth quarter of 2023 is still dominated by uncertain factors,” the bank forecasted.
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