IMF raises Vietnam’s 2024 GDP growth projection to 6.1%

Vietnam’s economic growth is projected to recover to 6.1% in 2024, the International Monetary Fund (IMF) says in its latest note, up from 5.8% forecast in April.

The growth will be supported by continued strong external demand, resilient foreign direct investment, and accommodative policies, the fund said in its conclusions of the 2024 Article IV Consultation with Vietnam, released on Friday.

Vietnam’s GDP growth accelerated to 6.93% in the second quarter of 2024, resulting in a reading of 6.42% H1/2024, government data showed.

In July, HSBC revised up its 2024 GDP growth projection for Vietnam from 6% to 6.5% after seeing a better-than-expected performance in Q2. A month later, the World Bank also lifted its forecast to 6.1% from 5.5% announced in April.

On Wednesday, the Asian Development Bank (ADB) said it kept its GDP growth forecast for Vietnam unchanged at 6% despite the devastating havoc wrecked by super typhoon Yagi. Meanwhile, Singapore-based United Overseas Bank (UOB) has slashed its growth forecast for Vietnam by 0.1 percentage point to 5.9% this year, citing the typhoon.

The IMF reckoned that domestic demand growth is expected to recover gradually as corporates navigate through high debt levels while the real estate sector will only fully recover over the medium term.

Inflation, measured by the consumer price index (CPI), is forecast to end the year at 4.1%, up from the fund’s projection of 3.7% in its “World Economic Outlook” in April. However, the gauge is still within the government’s target of 4-4.5%.

The fund pointed to high downside risks. Exports, a key driver for Vietnam’s economy, could weaken if global growth disappoints, global geopolitical tensions persist, or trade disputes intensify.

Given easy monetary conditions, if exchange rate pressures were to persist for longer, it could lead to a larger pass-through to domestic inflation, it added.

Persistent weakness in the real estate sector and corporate bond market could weigh more than expected on banks’ ability to expand credit, hurting economic growth and undermining financial stability.