Manufacturing, property sector recovery to drive Vietnam's economy: StanChart economist

Manufacturing should be the key driver of Vietnam's economy in 2025, but the property market may need a bit longer time to see a clearer recovery, said Tim Leelahaphan, senior economist, Vietnam and Thailand, Standard Chartered Bank, in a talk with the media on the sidelines of a recent forum in Ho Chi Minh City.

What is your forecast on Vietnam's economic growth this year?

Vietnam's GDP growth in 2025 is expected to reach 6.7% (7.5% in H1 and 6.1% in H2), driven by continued business expansion this year and beyond, with foreign investment playing a key role.

In the first half, we expect the economy to continue recovering from last year. The country did quite well in 2024, growing 7.07%. I think once we enter the second quarter, we should have details of U.S. trade policy: Whether it would be a universal tariff on some products or a higher tariff on China, whether it would be a bilateral or reciprocal tariff on some nations, and whether Vietnam would still be free from the tariff or Vietnam ultimately would be taxed by the U.S. administration.

There are many uncertainties in the arena of trade, that's why we expect the first half to continue seeing strong growth from last year. But once entering the second quarter, the global trade environment might not be that supportive, and that's why we have some reservations in the second half of the year.

What sectors will contribute the most to the economic growth?

I think the manufacturing sector has continued to show some early signs of a recovery. Signs of recovery have also been seen in the property market. We did see some growth in the property sector, such as the issue of financing access for some developers.

I think we might need to closely watch the retail consumption side because recent economic data showed some moderation in car sales and did show moderation in retail sales. If we expect inflation to continue rising later this year, I think that could be another factor to affect the consumption.

Manufacturing should be the key driver of the economy. The property market may need a bit longer, a bit of time to see a clearer recovery, but it did show some recovery.

What are the bigger challenges for the Vietnamese economy in 2025, apart from inflation?

There are some key challenges this year. The government expects 8% growth; that should mean more demand and inflation could continue to rise throughout 2025; that's the first challenge. Second, clearly the global trade environment, especially in the second half of the year

The third challenge would be on the currency. I think VND has been quite volatile. The exchange rate began the year at VND25,500 per U.S. dollar and then VND became stronger, appreciating to 25,300, but recently with global trade war noise and U.S. trade policy noise, it again depreciated with USD now trading at 25,600.

I think volatile VND could lead to markets starting to talk more about the possibility for the State Bank of Vietnam to hike interest rates. Other central banks are cutting rates. Rates in Vietnam have been on the low side for a while, but with inflation reversing higher, I think we should hear more talks about rate hikes in Vietnam.

How will Vietnam be affected by the global trade environment?

If we talk about a universal tariff on some products, iron and aluminum for instance, it's not the key product for Vietnam's exports.

Let's look back at the previous trade war in 2018-2019. Due to tariffs on China, some businesses then tried to avoid tariffs by relocating to Vietnam. So if we talk about tariffs on China, they could provide opportunities for Vietnam. But then there's another type of tariffs, this kind, the bilateral or reciprocal. I think this is of concern because Vietnam has had quite a large trade deficit with the U.S.

Vietnam can be looked at or can be monitored by the U.S. administration. The country can be imposed tariffs upon, or have opportunities like in the previous episode. Things are still uncertain, we are waiting for clarity. Some tariffs could provide opportunities, some tariffs we might need to watch closely as they could erode some benefits that the country can earn. Things might not be as easy as we had in 2018-2019.

What is your advice for Vietnamese enterprises?

I think Vietnam has had quite a good relationship with the U.S. administration. Since President Donald Trump began his second term, we have heard from Vietnamese authorities that Vietnam is trying to strengthen cooperation, to have a good relationship with the U.S. administration.

I think instead of recommending authorities to import more, maybe we should recommend companies to monitor the volatility of the export market, do hedging, and diversify to have more markets. Vietnam's economy and exporters might need to create more diversification. They should simplify tools to trade with other trading partners.