HSBC upgrades Vietnam’s 2024 GDP growth forecast to 6.5%

HSBC has revised up its 2024 GDP growth projection for Vietnam from 6% to 6.5% after seeing a better-than-expected performance in Q2.

That pace will likely make the country the fastest-growing economy in ASEAN in 2024, a spot it lost to Malaysia and the Philippines in 2022 and 2023, respectively, the UK-headquartered bank said in a note released on Wednesday.

The bank highlighted that Vietnam ended Q2/2024 with a “massive upside surprise” to its GDP growth, which accelerated to 6.93% year-on-year, solidly beating HSBC and market expectations of 6%.

Beyond headline numbers, its recovery has started to show signs of broadening out, the bank’s researchers said.

The biggest upside surprise to them came from the manufacturing sector, which expanded 10% year-on-year. This is also reflected in strong growth in Q2 exports of 15% year-on-year, driven by both electronics and non-electronics shipments, including exports of textiles and footwear that bounced back to see double-digit growth in Q2.

Seeing Q2 acceleration, Hanoi-based KB Securities Vietnam (KBSV), owned by South Korea’s KB Financial Group, has also revised upwards its projection for Vietnam’s 2024 GDP growth to 6.5% from the earlier 6%.

The stockbroker anticipated by a recovery of manufacturing and exports thanks to stronger external orders; continued resilient foreign direct investment inflows; a boost to public investment; and a recovery of stimulus-driven domestic demand and the real estate market.

The Ministry of Planning and Investment earlier this month upgraded its GDP growth projections to 6.5-7%, 0.5 percentage points higher than the previous band.

In its latest release, HSBC also maintained its view that the State Bank of Vietnam (SBV) is likely to keep its policy rate steady at 4.5% this year, despite lingering forex concerns that may prompt the SBV to hike.

Regarding inflation, the bank commented that barring a deterioration of the ongoing African swine fever that might impact the supply of pigs, inflation has likely peaked.

The bank forecasts inflation to moderate to a little above 3% on average in H2/2024, likely bringing average inflation to 3.6%, its recently-updated forecast for 2024.