UOB raises Vietnam’s 2024 GDP growth forecast to 6.4% after Q3 'surprise'

Researchers with Singapore-headquartered United Overseas Bank (UOB) have revised up their projection for Vietnam’s 2024 GDP growth to 6.4% from 5.9% after a "surprisingly strong" Q3 performance.

The revision is to account for the year-to-date performance and the disruptions to activities in early Q4/2024 caused by typhoon Yagi, the bank said in a release on Tuesday.

UOB’s upward revision marked a turnaround as the bank late last month had cut its 2024 growth forecast for Vietnam by 0.1 percentage point to 5.9%, taking into account the damage caused by typhoon Yagi which made landfall in Vietnam on September 7, leaving over 300 dead and devastating the northern region.

According to government data released on October 6, the local economy expanded 7.4% in Q3, higher than the median consensus view of 6.1% and UOB’s forecast of 5.7%.

This was the fastest pace since Q3/2022 when activities rebounded sharply from the trough of the pandemic. “The surprise Q3/2024 outcome reflected the resilience of the economy, despite the devastation by deadly typhoon Yagi,” the bank said.

The latest figure extended the revised 7.09% gain in Q2/2024, resulting in a cumulative 6.82% year-on-year increase in the first nine months of 2024.

The Q3 pace would have been much higher without the typhoon, said Deputy Minister of Planning and Investment Tran Quoc Phuong on Monday.

The UOB researchers commented that both the manufacturing and services sectors continued to be the main drivers of business activities, while external trade maintained its strong pace in Q3/2024.

The upswing in semiconductor sales since mid-2023 suggests that the momentum will likely be sustained in the one to two quarters ahead, they added.

They kept their growth forecast for 2025 unchanged at 6.6%, reflecting an expected ramp-up in output early next year to compensate for the earlier losses as a result of typhoon Yagi, as well as spillover effects from U.S. Fed’s policy easing and China’s stimulus measures.

With inflation showing signs of easing, USD strength expected to wane further on the back of the U.S. Fed easing policy, and with adverse effects spreading in the aftermath of typhoon Yagi, the risks of the State Bank of Vietnam shifting towards easing its policy have certainly been more considerable than before, said the researchers.

They anticipated the SBV maintaining its refinancing rate at the current 4.5% while focusing on facilitating loan growth and other support measures.

On Tuesday, the World Bank revised up its 2024 GDP growth forecast for Vietnam to 6.1% in the October edition of its East Asia and the Pacific (EAP) Economic Update, up from 5.5% in the April edition.

Prime Minister Pham Minh Chinh asked government agencies to strive for a growth rate of 7.5-8% in Q4/2024, for the whole-year performance of 7% and above.