Vietnam economy overcomes challenges, thrives in 2024: HSBC economist

Vietnam’s economy has successfully navigated challenges and achieved significant growth in 2024, thanks to strong economic fundamentals and government support for key domestic sectors, says Yun Liu, ASEAN market economist at HSBC.

Vietnam’s growth is projected to reach 7% in 2024, driven by robust economic fundamentals. Notably, the manufacturing sector has played a pivotal role in this recovery, serving as a cornerstone of growth and cementing the country's position in the global market over the past 7-8 years, Yun Liu told the Vietnamese government's news portal in an interview.

After a challenging start in Q1/2024, Vietnam’s economic landscape improved steadily throughout the year. Growth picked up significantly, with GDP rising by 6.9% in Q2 and 7.4% in Q3 compared to the same periods in 2023.

Concerns remain about the effects of super typhoon Yagi, the strongest storm to hit Vietnam in 70 years, particularly its impact on the agriculture, forestry, and fisheries sectors. However, manufacturing and trade showed resilience, continuing to lead the recovery, she said.

In the first 11 months of 2024, Vietnam’s total import and export turnover grew by 15.4% year-over-year. The electronics sector’s impressive rebound was a highlight, showcasing Vietnam’s expanding capabilities in high-tech manufacturing.

The HSBC economist noted that government policies have been instrumental in supporting domestic sectors, like reduced environmental taxes on fuel and value-added tax cuts on select goods and services. Meanwhile, the revised Land Law, set to take effect in August, is expected to boost the real estate market.

Supportive fiscal and monetary policies are likely to continue, helping Vietnam achieve its economic growth targets for 2024 and laying a solid foundation for 2025, she added.

Foreign direct investment (FDI) was a bright spot, with existing FDI enterprises reinvesting and expanding production capacity. Recent developments included Foxconn subsidiary Shunsin increasing its investment to produce integrated circuits in Bac Giang province from $20 million to $80 million.

In addition to electronics, high-value sectors are drawing attention from global corporations. Google plans to open an office in Vietnam in April 2025, while Nvidia and the Vietnamese Government in early December signed a deal to jointly set up an AI R&D center and an AI data center in the country.

Vietnam’s efforts to strengthen diplomatic ties with international partners further enhanced investment flows. Recent milestones included upgrading relations with France to a comprehensive strategic partnership and elevating the Vietnam-United Arab Emirates relations to a comprehensive partnership. The UAE has become Vietnam's first comprehensive partner in the Middle East.

Vietnam’s National Assembly has set an economic growth target of 6.5-7% for 2025, aiming for 7-7.5%, reflecting optimism about continued improvements in economic activity. The manufacturing sector’s strong recovery has fueled double-digit export growth, particularly in agricultural products.

In response to the recovery momentum, HSBC’s Global Research team has revised its GDP growth forecast for 2024 upward to 7%, from a previous estimate of 6.5%. The forecast for 2025 remains at 6.5%.

However, HSBC analysts highlight risks and challenges, including Vietnam’s heavy reliance on U.S. consumer demand. A slowdown in U.S. household spending or changes in trade policies could pose significant risks to Vietnam’s export-driven economy.

Domestic retail consumption, another key growth pillar, has been recovering more slowly than anticipated. Retail sales growth remains below pre-pandemic levels, indicating a lagging recovery in this sector.

“Private consumption is growing, but it’s still about 10% below potential. There’s untapped potential in domestic consumption, but it will take time for it to catch up with the strong recovery in exports,” Yun Liu added.