HSBC raises Vietnam’s 2024 growth forecast to 7% on ‘strong upside surprise’

HSBC has lifted its 2024 GDP growth forecast for Vietnam to 7% from 6.5% after the country recorded stronger-than-expected growth in Q3 despite the devastation left by super typhoon Yagi.

From a challenging 2023 and Q1/2024, Vietnam is clearly back as ASEAN’s growth star. Q3 growth came in at 7.4% year-on-year, beating HSBC and market expectations of 6.2% and 6.1%, respectively, the bank said in its update released on Friday.

In July, HSBC had raised its forecast for Vietnam's GDP growth for this year to 6.5% from its previous forecast of 6%, after second-quarter growth beat consensus.

On September 30, the British bank maintained its growth projection at 6.5% for both 2024 and 2025, despite temporary economic disruptions from super typhoon Yagi, the most powerful to hit the country in over three decades.

According to HSBC, the outperformance continued to be led by manufacturing, which grew 11.4% year-on-year. This was corroborated by healthy trade data, with exports rising 15.3% year-on-year in Q3.

“Encouragingly, the trade recovery that was initially centered around electronics is showing signs of broadening out, with textiles and footwear exports rising 16.7% year-on-year,” the bank noted.

While typhoon Yagi likely played a role in weighing on export growth in September, the impact is expected to be short-lived. In contrast, growth in the agriculture, forestry, and fishery sector moderated as a reflection of typhoon Yagi’s larger impact on the sector.

Meanwhile, the recovery in domestic-oriented services continued to remain relatively muted, with the spillover from a rebounding external sector not being as pronounced. Retail sales growth has shown little signs of accelerating, while monthly international tourist arrivals have stalled amidst rising regional competition to draw travelers.

“That said, encouraging green shoots can be observed, with financial and real estate services showing an acceleration in Q3/2024. The revised Land Law effective August will buttress improving sentiment seen in the real estate sector, while ongoing government measures such as tax cuts should also support the domestic retail sector with time,” said the bank.

Inflation has shown notable moderation in recent months on the back of base effects and more favorable price developments vis-à-vis commodity prices and currency moves. While risks such as supply-side disruptions from typhoon Yagi and geopolitical conflicts remain present, inflation well below the government’s 4.5% target ceiling will allow the State Bank of Vietnam to maintain an accommodative stance and focus on supporting growth.

For 2025, HSBC keeps its GDP growth forecast unchanged at 6.5%. The bank also keeps its inflation forecasts and policy rate views unchanged, with external risks still in the periphery.

On FDI, Vietnam continued to attract foreign inflows as fundamental prospects remain positive.

Looking ahead, manufacturing inflows are also likely to remain resilient, with Party General Secretary To Lam’s recent visit to the U.S. yielding investment intentions from various firms such as Meta, said HSBC.

Continued efforts to deepen ties with international partners will also act as a tailwind for further investment inflows, with Vietnam recently upgrading relations with France to a comprehensive strategic partnership, it added.

Earlier this week, Singapore-headquartered United Overseas Bank (UOB) revised its projection for Vietnam’s 2024 GDP growth to 6.4% from 5.9% after a "surprisingly strong" Q3 performance.

Similarly, the World Bank raised its 2024 GDP growth forecast for Vietnam to 6.1% from 5.5% released in April.

Last month, the International Monetary Fund (IMF) said Vietnam’s growth is projected to recover to 6.1% in 2024, up from the 5.8% forecast for April.

Also last month, U.S.-based market intelligence company S&P Global revised up its GDP growth for Vietnam to 6.2% this year, higher than the 5.8% figure in June.

The Vietnamese government seeks to grow its economy by 7.6-8% in Q4/2024 to reach the whole-year reading at 7% or more, higher than the National Assembly-mandated target of 6-6.5%, Minister of Planning and Investment Nguyen Chi Dung said on Monday.