Singapore bank UOB trims Vietnam’s 2024 growth forecast to 5.9% on typhoon Yagi

Singapore-based United Overseas Bank (UOB) has revised down its GDP growth forecast for Vietnam by 0.1 percentage point to 5.9% this year due to the damage caused by super typhoon Yagi.

“This is still a meaningful rebound from the 5% growth in 2023,” UOB said in its latest Vietnam update.

UOB researchers noted that although Vietnam experienced a growth surge of 6.93% in Q2, the fastest pace in nearly two years, this momentum is unlikely to continue into the H2.

The setback and disruptions from typhoon Yagi, the most powerful in Asia this year, will be felt more acutely in late Q3 and early Q4 in the country’s northern region. The impact will manifest in lost output and damaged facilities from manufacturing, agricultural and various services segments.

According to the Ministry of Planning and Investment’s preliminary estimates, the typhoon caused damages worth VND40 trillion ($1.63 billion) in northern localities. The adversity is estimated to reduce Vietnam’s 2024 GDP by 0.15 percentage points.

Minister of Planning and Investment Nguyen Chi Dung said that the typhoon had affected 26 localities, which accounted for 41% of the country’s GDP and 40% of its population.

Meanwhile, on September 18, Deputy Minister of Agriculture and Rural Development Nguyen Hoang Hiep said the damage caused by Yagi could hit $2.5 billion in value, significantly higher than the initial estimate announced by the Ministry of Planning and Investment.

The government expects the typhoon to reduce year-end GDP growth by 0.15 percentage points, while the Ho Chi Minh City Securities Corporation placed this figure at 0.38 percentage points.

Hai Phong, Quang Ninh, Thai Nguyen, and Lao Cai, the hardest-hit localities and also key industrial areas, could see growth slow by 0.5% percentage points.

“Nevertheless, aside from these temporary interruptions, long-term fundamentals remain sound,” the UOB researchers noted.

For Q3, they projected a slower growth rate of 5.7% (down from 6.0% previously), and for Q4 at 5.2% (down from 5.4%).

Vietnam’s GDP growth forecast for 2025 is adjusted up by 0.2% percentage points to 6.6%, reflecting an expected ramp-up in output to compensate for the earlier losses.

Despite the impact of the typhoon and a notable rebound in the USD/VND exchange rate since July, the UOB researchers continue to expect the State Bank of Vietnam (SBV), the country’s central bank, to maintain its key policy rates for the rest of 2024, with an eye on upside risks on price pressures.

The SBV is likely to adopt a more targeted approach to support impacted individuals and businesses in their regions rather than implementing a broad, nationwide tool such as interest rate cuts, the commented.

“Consequently, we anticipate the SBV maintaining its refinancing rate at the current 4.50% while focusing on facilitating loan growth and other support measures,” they added.

Compared to regional peers, the Vietnamese dong posted the largest quarterly gain on record dating back to 1993, rebounding 3.2% to VND24,630 a dollar.

Expectations of stable monetary policy from the SBV with a focus on boosting credit growth also support the VND. The researchers updated their USD/VND forecasts at 24,500 in Q4/2024, 24,300 in Q1/2025, 24,100 in Q2/2025 and 23,900 in Q3/2025.