ADB maintains Vietnam GDP growth projection at 6% for 2024 despite super typhoon Yagi

Vietnam’s economic growth can reach 6% in 2024 and 6.2% in 2025, following a 6.4% expansion in the first half of this year, according to the Asian Development Bank (ADB).

The ADB's latest projection, mentioned in the September edition of its Asian Development Outlook (ADO), did not take into account any impacts of super typhoon Yagi which hit Vietnam in early September.

The country's 2024 figure is the highest in Southeast Asia, on par with the Philippines. It is also higher than developing Asian nations' average of 5%.

The Vietnam forecasts are unchanged from the July and April editions of the ADO.

The ADB attributed Vietnam's strong performance to the strong momentum of the country's economic recovery, a strong trade bounce-back, strengthening inward foreign direct investment (FDI), gradual recovery in the global economy pushing up exports and imports, fiscal expansion and monetary easing supporting consumption.

However, the bank noted risks for Vietnam. Domestic demand will require stronger execution of fiscal stimulus measures. "Externally, subdued global prospects could further hamper external demand, adversely affecting exports, manufacturing activity, and employment," the ADB said.

"Vietnam’s exports face increasing competition due to trade diversions from global value chain reconfigurations for products, such as garments, textiles, and electronics, as well as risks from heightened geopolitical tensions and rising protectionism," it stressed.

Regarding the damages of typhoon Yagi, ADB country director for Vietnam Shantanu Chakraborty said there are opportunities for post-disaster recovery activities and boosting public investments in infrastructure can help increase investments and consumption and eventually the economic growth.

The ADB sticks with its estimation and the key focus is sustained growth with Vietnam as a prime example, he added.

The ADB's latest report noted that inflation in Vietnam can hit 4% in 2024 and 4% in 2025, unchanged from its July and April editions.

The factors such as wage hikes and government-controlled price adjustments are expected to push inflation upward. However, monetary easing by the U.S. Federal Reserve (Fed) would help alleviate some inflationary pressure, it added.

In the near term, loosening monetary policy must be closely coordinated with implementing fiscal policy to effectively boost economic activity. "Monetary policy will pursue the dual objectives of price stability and growth, even as policy space is limited," the ADB said.

The heightened risk of non-performing loans (bad debts) due to the economic down cycle limits the prospect of additional monetary easing, according to the ADB.

Regarding the impacts of Yagi, the Vietnamese government's preliminary report shows that the damage can reach VND50 trillion ($2.04 billion).

Super typhoon Yagi can reduce Vietnam’s GDP growth this year by 0.2-0.5 percentage points, according to a commentary of Mitsubishi UFJ Financial Group (MUFG), among the biggest banking institutions in Japan. MUFG estimated that resolving the disruptions caused by Yagi would take two-three months, possibly longer.

Meanwhile, the government's esimation is that the typhoon can slow down Vietnam's GDP growth by 0.15 percentage points.