Vietnam GDP can grow 6.1% in 2024 on rising external trade: WB

Vietnam’s economy is forecast to grow by 6.1% in 2024 and 6.5% in 2025 and 2026, the World Bank said in its August "Taking Stock" edition, a bi-annual economic report on the country.

This projection assumes an easing of manufacturing exports growth in the second half of this year, after a 16.9% rebound growth in H1 and the expected moderation of global demand in 2024, in particular from the U.S., Vietnam’s largest export market.

Export growth is expected to firm up moderately over 2025-2026 as global trade prospects and external demand from major trade partners such as the U.S., Euro zone and China improve slightly, according to the WB.

The real estate market is showing signs of recovery and is forecast to turn the corner in late 2024 and into 2025 as the corporate bond market freeze has eased and the Land Law has come into effect since August 2024.

With continued export growth and signs of a real estate recovery, domestic demand is set to firm up in H2 as investor and consumer sentiment improves, with total real investment and real private consumption expected to grow by 5.8 and 5.6% in 2024, respectively, the bank said.

Besides, the WB anticipated Vietnam's headline inflation can continue rising in 2024 to 4.5%, up from 3.2% a year earlier, as higher food prices are expected to persist.

This forecast reflects the recent surge in food prices, contributing most to recent inflation in H1, and is expected to continue rising as African swine fever outbreaks spread nationwide despite measures to strengthen control and prevention.

Despite continued conflicts in Ukraine and the Middle East, oil and commodity price inflation is projected to continue easing over 2024. The increase in public wages and pensions in July 2024 is expected to have a marginal impact on headline inflation given the limited size of the public sector in overall employment.

Over the medium term, inflation is forecast to fall to 4% in 2025 and 3.5% in 2026, according to the bank.

Growth momentum

The WB said as the economy is not yet back to its pre-pandemic growth path, accelerating disbursement of public investment would support aggregate demand in the short run, while also helping to close emerging infrastructure gaps.

On the other hand, monetary authorities continue to face limited room for additional interest rate cuts due to existing large interest rate differentials between domestic and international markets and the pressure it could bear on the exchange rate.

Building on recent reforms, further steps to mitigate financial sector risks and vulnerabilities remain crucial. Authorities could encourage banks to improve capital adequacy ratios and strengthen institutional frameworks for prudential supervision (including detecting and addressing issues arising from the affiliation of banks with business groups) and early interventions (early identification of problems and prevention of fully blown crises).

In their recent reports, HSBC, the ASEAN+3 Macroeconomic Research Office (AMRO) and Shinhan Bank Vietnam said Vietnam's GDP growth in 2024 can reach 6.5%, 6.3%, and 6%, respectively.